J Sainsbury - Becoming more convenient

Tuesday, Sep 15 2009 by

Having overseen the eighteenthsuccessive quarter of sales growth at supermarket giant J Sainsbury (LSE, SBRY), it is little wonder that group CEO Justin King is being labelled the Fabio Capello of the retail world. 

 The company’s dynamism has meant that sales (unlike for most) have continued to grow during the recession thanks in part to the increased roll out of the economical ‘Basics’ range.  However, with the economic climate brightening, other factors rather than price will determine consumer behaviour.  And having made a successful investment in price reductions management’s focus has now shifted to an aggressive expansion of locations which the recently announced £445 million capital raising will facilitate.

In our view, the placing is an astute move.  With plans for fifty new stores in 2009/10 and a further 100 stores in 2010/11, the placing has fortified the group’s balance sheet and has enabled management to increase planned capital spending in the next two years by 25% to £2 billion. 

If recent performance is anything to go by, more space should translate to greater profits.

During the 12 weeks to 13 June 2009 like-for-like sales climbed 7.8 per cent excluding fuel and VAT (the rate of which changed between periods).   Importantly, customer numbers increased to over 18.5 million per week and basket size has grown as the company’s investment in price and bolstering product ranges paid dividends.

Sainsbury’s expansion will place yet further pressure on rival Tesco, whose market dominance has been eroded of late by its rivals Asda, Sainsbury’s and Morrison’s.  In their most recent battles, Sainsbury’s has regularly secured the upper hand over Tesco and its 7.8 per cent growth eclipsed Tesco’s 4.3 per cent over the same period.  We see this trend continuing and believe Tesco will face the most robust challenge since it became the industry’s dominant player 15 years ago.   

Encouragingly, 40 per cent of Sainsbury&rsqu


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J Sainsbury plc is engaged in grocery and related retailing. The Company is organized into three segments: Retailing (Supermarkets and Convenience); Financial services (Sainsbury’s Bank joint venture), and Property investments (The British Land Company PLC joint venture and Land Securities PLC joint venture). As of March 17, 2012, the Company operated over 1,000 stores comprising 572 supermarkets and 440 convenience stores. Investment properties held by the Company are those contained within its joint ventures with Land Securities Group PLC and The British Land Company PLC. In October 2011, the Company acquired online entertainment company, Global Media Vault Limited.Effective January 31, 2014, J Sainsbury PLC acquired the remaining 50% interest in Sainsbury's Bank PLC. Effective August 07, 2014, J Sainsbury PLC acquired a remaining 36% interest in Anobii Ltd. more »

Share Price (Full)
282p
Change
-2.2  -0.8%
P/E (fwd)
9.8
Yield (fwd)
5.6
Mkt Cap (£m)
5,439



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