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Sainsbury (J) PLC SBRY

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Sainsbury's Q3 Top-Line Miss Due to Clothing and Argos Offset by Profit Upgrade; Fairly Valued

Ioannis Pontikis, CFA Senior Equity Analyst

Analyst Note

| Ioannis Pontikis, CFA |

J Sainsbury reported its third-quarter and Christmas update with like-for-like sales growth (excluding fuel) down 4.5% (up 0.6% including fuel), lower than company-compiled consensus of negative 2.6%. The lower-than-expected top-line performance was driven by clothing sales (down 2.7%, or down 1.7% on a two-year basis) and the general merchandise category including Argos, down 16% and 16.1%, respectively. The grocery performance slowdown was largely expected as the benefit from increased food-at-home consumption trends starts to wane (down 1.1% in the third quarter versus up 7.4% in the same period last year and up 6.6% on a two-year basis). The online sales growth slowdown was also expected, declining 16.5% year on year (up 92% on a two-year basis), with productivity of online fulfilment and densities improving; picking rates, drop densities, and basket size were higher year on year by 4%, 2%, and 6%, respectively.

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Company Profile

Business Description

Founded in 1869, Sainsbury's is the second-largest U.K. grocery chain with 15% market share. It operates over 600 supermarkets and 800 convenience stores, all in the U.K. The company has diversified away from core food by selling clothing, telecom equipment, and other nonfood items. In September 2016, it took a step further into nonfood retailing with the purchase of Home Retail Group, operating the Habitat and Argos chains (general merchandise and electronics stores), for GBP 1.10 billion. It has been selling products online since 1997.

33 Holborn
London, EC1N 2HT, United Kingdom
T +44 2076956000
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings
Fiscal Year End Mar 31, 2022
Stock Type
Employees 117,000