Wednesday preview: Sainsbury's trading update in focus

10th Jan 2017 12:39

(ShareCast News) - J Sainsbury reports its third quarter trading update on Thursday, with investors interested to see how well the grocer weathered rising imports costs and a supermarket price war.Ahead of the trading update, Kantar Worldpanel said Sainsbury's sales fell 0.1% in the 12 weeks ended 1 January despite a strong period for online sales growth after its Argos acquisition.As prices rose for items such as fish and butter, only partly offset by falling prices for eggs and bacon, Kantar calculated that supermarket inflation reared up to 0.2% for the 12 weeks ending 1 January, following 30 months of industry deflation.A weaker pound following the UK's vote to leave the European Union on 23 June 2016 has pushed up the costs of imported goods, adding to the struggle for supermarkets which have been slashing prices in an effort to claw back market share from smaller discount chains such as Aldi and Lidl.George Salmon, equity analyst at Hargreaves Lansdown, said the so-called Big Four supermarkets in the UK may look to hold prices steady and take a hit to profitability as the price competition rages on in the face of increasing costs."However, the relentless focus on pricing in recent years has eradicated the bumper margins of years gone by, meaning the supermarkets have limited scope to absorb any increases," Salmon said."In the wings, Aldi and Lidl are unlikely to call a ceasefire in the price wars, it's difficult to see a palatable solution for the supermarkets in the short term. 'Marmitegate' may well be just a taste of things to come."'Marmitegate' refers to the issue Unilever encountered with its supermarket customers in October 2016 when it raised the price of its Marmite spread to offset the impact of higher costs and a weak pound.Premier Foods on Monday confirmed that it is in talks with customers to raise prices of its items, which include the Mr Kipling cake and OXO stock cubes. Sainsbury, Tesco and Asda are among the company's customers who will be affected.Meanwhile, Shore Capital said Sainsbury's is "no longer leading superstores in LFL sales momentum and may be one of the, if not the, main victim of any consumer shift to a recovering Tesco".Sainsbury's update will come a day after Morrison Supermarkets impressed the markets by saying it expects full year profit to be ahead of market consensus following one its strongest festive performance for seven years.For the nine weeks to 1 January, Morrisons grew like-for-like sales excluding fuel 2.9%, which would if nothing untoward happens in the rest of the month would represent the fifth consecutive quarter of growth in LFL sales.For the full year to the end of January, the FTSE 100 company estimated that it will produce underlying profit before tax within a range of £330-340m, versus the Vuma consensus of £326m.Tesco will report its third quarter trading update on Thursday.Thursday 12 January INTERIM DIVIDEND PAYMENT DATE Alliance Pharma, Norcros INTERIM EX-DIVIDEND DATE Accrol Group Holdings, Hayward Tyler Group, QinetiQ Group QUARTERLY PAYMENT DATE GlaxoSmithKline, Total SA, XP Power Ltd. (DI) QUARTERLY EX-DIVIDEND DATE F&C Commercial Property Trust Ltd. INTERNATIONAL ECONOMIC ANNOUNCEMENTS Continuing Claims (US) (13:30) Import and Export Price Indices (US) (13:30) Industrial Production (EU) (10:00) Initial Jobless Claims (US) (13:30) SPECIAL EX-DIVIDEND DATE DotDigital Group, Henderson Alternative Strategies Trust , Scottish Inv Trust EGMS Public Power GDR SA (Reg S) AGMS Debenhams TRADING ANNOUNCEMENTS Associated British Foods, Barratt Developments, Hays, The Gym Group FINAL EX-DIVIDEND DATE Connect Group, Countryside Properties, DotDigital Group, Dunedin Smaller Companies Inv Trust, easyHotel, Henderson Alternative Strategies Trust , Income & Growth VCT , JPMorgan Asian Investment Trust, Majedie Investments, Octopus VCT 3, Octopus VCT 4, Patisserie Holdings , Scottish Inv Trust, Unicorn AIM VCT , Urban&Civic , WH Smith