Glory days are over at Sainsbury's

City talk

WHAT'S wrong with Sainsbury's? Our chart shows the way the shares have performed over the past five years. Clearly, the pattern of uninterrupted growth seems to have faltered. So can the stock stage a recovery? The answer, sadly, is a qualified no. Pundits proclaim a new era of low inflation, which translates at the high-street level into a wave of destocking, as consumers opt for value rather than quality - or so we are told.

Whether this can last is hard to say. But Sainsbury's had built its fortunes on its appeal to quality, and benefited from the higher margins of this strategy. The trouble with this, critics say, is that the group has taken its eye off the main ball - its customers. Good margins, now under pressure, have been at the expense of good customer relations. Sainsbury's management is also under fire for losing ground to its rivals. Tesco, Asda and Argyll have made startling advances in the past few years. In many of its stores, Tesco offers shoppers a more pleasant environment.

Can Sainsbury's fight back? Perhaps, but the problems may need more than just tinkering with; it could require wholesale change to how the group does business, which will take years, not months. So the limits to growth seem to have been reached, and the glory days are over. If you have been a long-term holder, at 391p, now is probably a good time to lock in some profits and wave goodbye to the shares.

GAMES Workshop is the sort of company whose shareholder following could match the devotion of its customers. The latter are addicted, some would say, to Games Workshop's range. Its main product is lead model warriors for complex board games. Fans take days, weeks even, playing out intergalactic battles and planetary conquests. There is also a substantial income from supporting products, like newsletters. Although the group has excellent growth prospects within its current markets, there is a strict limit to how far this can go. After all, not everyone will want to settle down of a weekend with Warhammer. But for now the figures look exciting. Interims last week for the six months to November showed a 31 per cent boost in sales, to pounds 19.5m, with pre-tax profit of pounds 3.16m, up from pounds 2.46m. The shares, at 308p, trade on a price-earnings ratio of 23 - pricey, but worth a punt.

FUND management group Perpetual has been in the spotlight, with the shares romping ahead to 2,185p by Friday, up from 2,040p at the start of the week. But majority owner Martyn Arbib, who between his family and charitable trusts controls 65 per cent of the shares, has said he is not a seller. Of course, everybody has a price, as Arbib, a shrewd operator, would admit.

Perpetual is well up there as one of the most successful fund management groups in the UK, and with outstanding performance by many of its funds, it has earned the admiration of the City and private investors. But a buyer will only want to strike a deal if it can guarantee the existing management stays with the new owner. If a bidder were to emerge, the recent gains have eliminated much in the way of a premium they would be willing to pay. Sell.

THE outbreak of hostilities in Toyland, with the mega-bid battle unleashed by Mattel for Hasbro, has fizzled out. But whatever excitement was generated by the American drama largely passed by shares in toy minnow Cassidy Brothers. Little surprise here, since over the past seven years from the time of its flotation, it has managed to return an average 4 per cent capital appreciation a year. Recent results were nothing to shout about, with pre-tax profits for the six months to November down a touch to pounds 0.50m from pounds 0.52m. Now traded on the Alternative Investment Market, the share, at 68p, is one to avoid.

THERE are numerous uncertainties surrounding the recent news from Airtours that it was in possible negotiations to sell a 30 per cent stake in the company to fellow tour operator Carnival Corporation of the US. A 30 per cent rise in the share price, to 434p, is a signal to bale out. The $6.5bn US company has yet to reveal its plans, but there are some worrying aspects which may not bode well for shareholders in the future. Given that Airtours management already owns 30 per cent of the shares, another 30 per cent held by a friendly shareholder would weaken the position of the ordinary shareholders. Sell.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
General Election 2015: Tories and Lib Dems throw their star names west to grab votes

All noisy on the Lib Dems' western front

The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

How Etsy became a crafty little earner

The online market has been floated for £1.2bn, but can craft and capitalism coexist?
Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

King Arthur is inspiring Guy Ritchie

Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
Apple Watch: Will it live up to expectations for the man or woman on the street?

Apple Watch: Will it live up to expectations?

The Apple Watch has apparently sold millions even before its launch tomorrow
Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

Don't fear the artichoke

Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
11 best men's socks

11 best men's socks

Make a statement with your accessories, starting from the bottom up
Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

Paul Scholes column

Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

Frank Warren's Ringside

Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

Kenya's brothers in arms take on world

Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

Natalie Bennett interview: I've lost track of the last time I saw my Dad

Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

Khorasan is back in Syria

America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

On the campaign trail with Ukip

Is William Cash the man to woo Warwickshire North?
Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

Expect a rush on men's tights

Studios line up four Robin Hoods productions
Peter Kay's Car Share: BBC show is the comedian's first TV sitcom in a decade

In the driving seat: Peter Kay

Car Share is the comedian's first TV sitcom in a decade. The programme's co-creator Paul Coleman reveals the challenges of getting the show on the road