Sainsbury's "best positioned" among grocery stocks, Charles Stanley upgrades

15th May 2015 14:35

Charles Stanley has lifted its recommendation for J Sainsbury from 'hold' to 'accumulate' despite the grocer's weak results earlier this month.Analyst Sam Hart said that investor sentiment towards the supermarket giant could improve.Trading conditions for Sainsbury's are expected to remain challenging in the current financial year ending March 2016 with like-for-like sales remaining negative.A further decline in earnings and the dividend in the current year seems "inevitable", Hart said."Despite the bleak near-term outlook, we see potential for earnings to stabilise and begin to recover on a three-year time horizon."We think Sainsbury's remains the best positioned of the three major UK-listed food retailers, given its more affluent customer base (less sensitive to price) and early entry into the convenience store and on-line grocery segments."Hart said that the supermarket's current valuation - the stock trades at 11.7 times earnings - suggests that a gloomy near-term earnings outlook is already discounted.He added: "We see potential for investor sentiment to improve toward the end of the current financial year, if a relative improvement in like-for-like sales trends emerges. Sainsbury's is our preferred vehicle for playing any recovery in the UK food retail sector."The stock was down 1% at 266.5p by 16:25.