US stocks are landing at Stockopedia Find out more

Moving Beyond Food

Tuesday, May 25 2010 by
Moving Beyond Food

With the group's recovery story continuing the recession has largely passed J Sainsbury (LON:SBRY) by. Going forward the potential for the group is to increase its presence in non-food areas and outside of Southern England. In the meantime the core business looks set to continue to improve its efficiency providing a boost to the bottom line.

During 2009, J Sainsbury opened 51 convenience stores. The group expects that the opening rate is set to double to 100 in the years ahead whilst online groceries are also performing well with growth of 20%.

Turning towards non-food and at present supermarkets currently account for less that 15% of the £166bn of the retail market in the UK. The industry hopes to increase this by offering high-street style but at supermarket prices.

During 2009, the growth of non-food was three times faster than for food illustrating the potential for this area. A good indicator of this is that the group is now the seventh largest childrenswear retailer in the UK; supermarkets like Sainsbury’s have also been aggressive in moving into video games.

Geographically J Sainsbury also believes it remains under-represented in certain parts of the country with 40% of the UK not living within a 10-minute drive of a Sainsbury's store. If a line were drawn from Bristol through the Midlands and then to King's Lynn the group would have a 20% market share south of this line and 10% above it.

 

Financial services are also potentially a growth area for the company as it can offer extra Nectar points for customers who take up financial services offered by the group. Award winning financial services which the group is offering include credit cards and home insurance.

 Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »

In 2009, Sainsbury's had a market share of 16.1% which was an increase of 0.2% on 2008. The group also grew retail space by 6.8% in 2009 by adding 1.1 million sq ft and the additional space has been performing above expectations. For 2010/11 the plan is to grow space by 8% which will help meet the target of 15% growth in the two years to March 2011. The internal rate of return on the new space is expected to be 15%.

Turning to the financial results and total sales roles 5.1% while like-for-like sales increased by 4.3%. In fact like-for-like sales have climbed by nearly 25% over 5 years illustrating the scope of the turnaround.

Management expects 2010 to be a tough year and in this context it is interesting to note that rival Asda (owned by Wal-Mart) reported a fall in Q1 sales which was the first quarterly fall for Asda in four years. Momentum should, however, continue at Sainsbury's given that there still appears to be scope to improve margins.

Turning to the balance sheet, the group’s property portfolio is a key asset with net debt of £1.5bn secured against it which allows very low borrowing costs. During the year the property the group has increased in value by £2.3bn to £9.8bn and set against this the pension deficit of £303m is easily manageable.

 

Sainsbury's Chart 


Filed Under: Supermarket,

About the Author's Investment Research

Fat Prophets Profile Image Promotional
Fat Prophets

On joining Fat Prophets, you’ll gain instant access to the Member’s area, packed full of information on a broad range of companies and markets. As a Fat Prophets Member, you’ll receive our weekly research reports (published 49 times per year), containing stock recommendations (buys, sells and holds) as well as… ...read more or visit website »


Disclaimer:  

Fat Prophets has made every effort to ensure the reliability of the views and recommendations expressed in its reports. Fat Prophets research is based upon information known to us or which was obtained from sources which we believed to be reliable and accurate at time of publication. However, like the markets, we are not perfect. This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each recommendation for their own specific circumstances and realise that not all investments will be appropriate for all subscribers. To the extent permitted by law, Fat Prophets and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Fat Prophets hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply. 


Do you like this Post?
Yes
No
0 thumbs up
0 thumbs down
Share this post with friends



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. In June 2012, J Sainsbury PLC acquired HMV Group plc's holding in Anobii Limited, a social network and online retailer of e-books. Effective January 31, 2014, J Sainsbury PLC acquired the remaining 50% interest in Sainsbury's Bank PLC. more »

Share Price (Full)
312.88p
Change
-0.4  -0.1%
P/E (fwd)
10.6
Yield (fwd)
5.3
Mkt Cap (£m)
6,002



  Is J Sainsbury fundamentally strong or weak? Find out More »


What's your view on this article? to Comment Now

 
 
You are feeling neutral

Use the £ sign in front of a ticker to turn £VOD into Vodafone PLC

You can track all @StockoChat comments via Twitter


About Fat Prophets

Founded in 2000, Fat Prophets has grown to become one of the world’s leading independent stock market research houses.When we launched with our quirky, yet hopefully memorable name, we saw a finance industry that was out of touch with investors needs. A new breed of Do-It-Yourself investors was entering the market and they needed stock market research they could trust. So we set ourselves a mission that is as true today as the day we launched: our mission is to make your investments as FAT as possible. We achieve our mission by advising our Members exactly what share to buy, at what price and when to sell to maximise their potential returns. more »



Stock Picking Tutorial Centre


Related Content

Stock Picking Simplified

Stockopedia takes your stock picking to the next level with cutting edge Stock Reports & Screening tools.


Get started
or Take a Tour to find out more.