Why Is J Sainsbury Plc’s Sales Decline A Sign Of Things To Come?

  • Jan 09, 2020 GMT
  • Team Kalkine
Why Is J Sainsbury Plc’s Sales Decline A Sign Of Things To Come?
An overview of J Sainsbury Plc’s business

J Sainsbury Plc (LON: SBRY) is a general grocery retail chain, based primarily in London, United Kingdom. The company currently operates 820 convenience stores, 608 supermarkets, 1200 Argos physical locations with a property asset base of approximately £10.4 billion across the entire United Kingdom as well as Ireland. The company’s primary business strategy is to provide great products at affordable prices and making those products accessible to everyone. The company has various business divisions, which it operates through several of its key brands which are Sainsbury’ Groceries, Argos, Tu, Sainsbury’s Home and Habitat. Sainsbury Groceries, which is the company’s flagship brand, engages in the business of selling groceries through various stores across the country, as well as through its online website and mobile application. This includes approximately 12000 of its own products as well as 100 supermarkets which offer Smartshop self-scan, which allows the customers to avoid long ques at the time of billing.

J Sainsbury Plc Trading Update

On the morning of 8th January 2020, the company published its trading statement for the 15 weeks ended on 4th January 2020 by issuing a press release. The company reported the quarter wise sales performance for the three quarters of FY 2020. The company highlighted that the sales growth for the current period (Q3 2020) for the Grocery segment stood at 0.4 per cent, which was exactly the same as in the corresponding period of the previous year. It was also reported that there was a decline in sales growth for the General Merchandise segment of 3.9 per cent, as opposed to a decline of 2.3 per cent in the corresponding quarter of the previous year. The clothing segments sales growth for the period stood at 4.4 per cent, a massive improvement as against the performance in the previous year when there was a decline of 0.2 per cent in this particular segment. Overall, Total Retail sales growth (including Fuel segment) declined by 0.9 per cent during the period, as opposed to an improvement of 0.8 per cent during Q3 2019.

The company also presented operational as well as strategic highlights for the period, featuring six key result areas of the business. The company reported that they offered a competitive price on their products, offered unique and new products, made efforts towards making the shopping experience convenient for customers. The company also invested in customer offers, worked towards the growth of connected services and followed it up with providing a seamless customer experience.

The company also reported a Like for Like Sales (including fuel segment) decline of 1.1 per cent, as opposed to a growth of 0.3 per cent in the corresponding quarter of the previous year, marking a conclusion to an average quarterly performance.

Report – Reasons for sales downfall in third quarter

On 8th January, after the publication of the company’s trading statement for the third quarter of FY 2020, various media outlets reported on the reasons for the downfall in sales in the company’s business. Primary reason being reported was the surprise drop in the demand for toys and gaming products of the company during the Christmas period. The company highlighted that the customers had pulled back on to their spending this time around, probable because of low confidence due to the poor economic environment, as well as the uncertainty around Brexit. This, as per the company, is expected to continue till March 2020, when there will be more clarity around the time of first Budget of the newly elected Government, as well as around Britain’s exit from the European Union, which might have had a huge impact on the spending capacity of the customers. The company’s Finance Chief also highlighted that this was also on the back of a drop of 10 per cent in the overall United Kingdom toy industry. The company also updated that the gaming market was down by 35 per cent, primarily because no new introduction in terms of new consoles by companies. The company’s Chief Executive Officer also stated that they are not expecting things to change soon, unless and until there is a major overhaul in the current economic and political climate.

SBRY Stock Price Performance

(Source: Thomson Reuters) Daily Chart as on 09-January-20, prior to the closing of the London Stock Exchange

As on 9th January 2020, at 02:20 P.M Greenwich Mean Time, while this was being captured, J Sainsbury Plc’s stock price was reported to have been trading at GBX 223.80 per stock on the London Stock Exchange, a decline in the value of 1.50 per cent or GBX 3.40 per stock, in comparison to the previous day’s closing price, which was reported at GBX 227.20 per stock. While writing, the stock of J Sainsbury Plc has been trading 26.40 per cent over the 52 week low stock price, that was reportedly GBX 177.05 per stock, and the price was reached on August 15, 2019. While capturing, the stock price has been reported to be 24.49 per cent below the 52 week high price of GBX 296.40, that the company was reported to be trading on February 07, 2019. The market capitalisation of the company has been reported to be GBP 5.027 billion in reference with the current stock price.

J Sainsbury Plc’s share has given a negative return of around 17.90 per cent in price, within the previous twelve months, from the price of GBX 272.60 that the stocks achieved on January 09, 2019.

The stock beta of J Sainsbury Plc has been reported to stand at a value 1.0720. Through this, it can be implied that the movement in the price of J Sainsbury Plc stock, is slightly more volatile as opposed to the movement of the comparative benchmark index in the last year.

Stock price performance of peers of the company

Tesco Plc Stock Price Performance

As on 9th January 2020, at 02:00 P.M Greenwich Mean Time, while this was being captured, Tesco Plc’s stock price was reported to have been trading at GBX 254.90 per stock on the London Stock Exchange, an increase in the value of 1.55 per cent or GBX 3.90 per stock, in comparison to the previous day’s closing price, which was reported at GBX 251.00 per stock. The market capitalisation of the company has been reported to be GBP 24.581 billion in reference with the current stock price. The stock beta of Tesco Plc has been reported to stand at a value 1.0158. Through this, it can be implied that the movement in the price of Tesco Plc’s stock, is more volatile as opposed to the movement of the comparative benchmark index in the last year.

WM Morrison Supermarkets Plc Stock Price Performance

As on 9th January 2020, at 02:05 P.M Greenwich Mean Time, while this was being captured, WM Morrison Supermarkets Plc’s stock price was reported to have been trading at GBX 191.95 per stock on the London Stock Exchange, an increase in the value of 0.60 per cent or GBX 1.15 per stock, in comparison to the previous day’s closing price, which was reported at GBX 190.80 per stock. The market capitalisation of the company has been reported to be GBP 4.588 billion in reference with the current stock price. The stock beta of WM Morrison Supermarkets Plc has been reported to stand at a value 0.7080. Through this, it can be implied that the movement in the price of WM Morrison Supermarkets Plc stock, is less volatile as opposed to the movement of the comparative benchmark index in the last year.

Ocado Group Plc Stock Price Performance

As on 9th January 2020, at 02:10 P.M Greenwich Mean Time, while this was being captured, Ocado Group Plc’s stock price was reported to have been trading at GBX 1289.00 per stock on the London Stock Exchange, a decline in the value of 3.37 per cent or GBX 45.00 per stock, in comparison to the previous day’s closing price, which was reported at GBX 1334.00 per stock. The market capitalisation of the company has been reported to be GBP 9.476 billion in reference with the current stock price. The stock beta of Ocado Group Plc has been reported to stand at a value 1.0999. Through this, it can be implied that the movement in the price of Ocado Group Plc stock, is more volatile as opposed to the movement of the comparative benchmark index in the last year.

Comparative Stock Price Chart of TSCO, MRW and OCDO

(Source: Thomson Reuters) Daily Chart as on 09-January-20, prior to the closing of the London Stock Exchange

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