10th Jan 2024 11:00
(Alliance News) - J Sainsbury PLC shares fell on Wednesday, with a less-than-stellar Christmas for its clothing and merchandise offering taking the shine out of strong festive grocery sales.
The stock traded 5.0% lower at 290.50 pence each in London on Wednesday morning, the worst large-cap performer.
The London-based supermarket chain said grocery sales rose 9.3% year-on-year in the 16 weeks to January 6, with Christmas grocery sales in the final 6 weeks of that period climbing 8.6%.
General merchandise sales fell 0.6% annually in the 16 weeks, which includes Sainbury's third-quarter, and slumped 3.7% over Christmas. Excluding the exit of its retail chain Argos from Ireland, however, sales rose 1.5% in the 16 weeks and fell 1.3% in the festive period alone.
Clothing sales fell 1.7% in the 16 weeks and slumped 6.0% in the shorter period.
"Non-food sales were very disappointing, implying that Sainsbury's is either leaving areas like clothing and Argos' general merchandise offering to wither away or it simply isn't pushing the products that people want," AJ Bell analyst Russ Mould commented.
"Sainsbury's partially blames tough comparative figures from the previous year, yet it does feel as if Argos, in particular, has been bumped down the list of priorities for the group since Simon Roberts took over as chief executive. One has to question if the Argos brand is still the right fit for the grocery seller over the long term. If food is the priority, would the shop floor space currently occupied by Argos concessions be put to better use?"
Sainsbury's said total retail sales excluding fuel grew 6.5% annually in the full 16-week period, and 4.9% in the 6-week Christmas period.
For the financial year ending March 2, Sainsbury's reiterated annual guidance for underlying pretax profit between GBP670 and GBP700 million, compared to GBP690 million in financial 2023.
It expects to generate retail free cash flow of at least GBP600 million in financial 2024, compared to GBP645 million in financial 2023.
"We've worked hard to really deliver for our customers this quarter and have grown grocery volumes ahead of the market for the fourth Christmas in a row," said CEO Simon Roberts.
However, investment bank Jefferies said the strength in grocery is already priced in by the market, after data from Kantar last week suggested the sector had a bumper Christmas.
Kantar said grocery sales in the 12 weeks to December 24 rose 6.9% to GBP36.45 billion from GBP34.10 billion a year before. In the final four weeks of that period alone, sales totalled GBP13.7 billion.
The survey found Sainsbury's recorded market share growth to 15.8% from 15.5% for the 12 weeks. Its sales were 9.3% higher at GBP5.77 billion.
Jefferies analysts noted: "In the absence of a formal upgrade today, and with grocery strength well-understood by the market post-Kantar, we wonder if today's release prompts a travel-and-arrive pullback after the [more than] 20% increase in the shares since mid-October."
Going into Wednesday's trading day, Sainsbury shares had risen by just over 20% since its October 18 closing price of 253.90p. Wednesday's pullback means its gain since mid-October has wilted to 15%.
By Eric Cunha, Alliance News news editor
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