Broker snap: Slowdown at Sainsbury

23rd Mar 2011 10:57

Financial services firm Matrix expressed disappointment over Sainsbury's weak trading statement, as the supermarket giant grew like for like (LfL) sales by less than expected during the fourth quarter.Sainsbury revealed slowing fourth quarter sales in the 10 weeks to 19 March, with an increase of just 1% (excluding VAT, including fuel), against consensus estimates of a 2% rise, representing a slowdown from the previous quarter which saw sales increase by 3.6%.Analyst Tom Gadsby notes that sales problems appear to be more of a Sainsbury issue, as a meeting with rival grocer Morrison yesterday suggested that it is not seeing evidence of a consumer slowdown. "The sector is off today, so we suggest picking up some Morrison on weakness." Sainsbury is given a target price of 337p.Somewhat more optimistic is RBS, which chipped in to say that while fourth quarter LfL sales were softer than it expected, it still believes that UK grocers can continue to "deliver profitable growth in pretty much whatever trading conditions prevail." However, the broker noted that the statement backed up its view on the industry right now in terms of subdued trading, which it expects to continue through 2011.RBS said food price inflation and fuel prices are "clearly having an impact on consumer spending and consumption patterns, let alone any other macro factors that suggest the UK consumer is in a fragile state right now."It gives Sainsbury its 'hold' rating, and a target price of 370p.