Broker snap: HSBC cuts Sainsbury target after CEO exit

30th Jan 2014 10:26

HSBC has reduced its target price for supermarket group Sainsbury after the exit of Chief Executive Officer (CEO) Justin King, who is stepping down after 10 years as boss.The bank kept its 'neutral' rating for the stock and has reduced its target from 380p to 360p to "reflect the increased risk from a management change at this delicate time, and reflecting our increased concerns on the supermarket industry in general".The departure, which had been rumoured for months, will see current Group Commercial Director Mike Coupe succeed King at the top of the UK grocery retailer.HSBC said that King has had an "excellent" decade as CEO, and "has done a much better job at Sainsbury than many would have expected"."He was dealt a weak hand when taking the job, and has played it very well."However, the bank said that while the last 10 years have been tough, the next 10 year are likely to be tougher."The industry has fundamentally changed because consumers have structurally changed the way they shop. In our opinion large supermarkets, superstores and hypermarkets are in structural decline, as consumers switch to convenience, discounters and the internet."HSBC said that despite recent outperformance against rivals Tesco and Morrison Sainsbury's core estate is still in decline with underlying sales still falling."We do not expect much strategic change in the short term under Mike Coupe, but we believe there should be."The bank said that Sainsbury is vulnerable to a change in pricing strategy at Tesco which could - it suggested - pursue a 'Malboro Friday'-type strategy.The stock was down 0.57% at 346.5p by 11:14.BC