Sainsbury's shares soar as sales decline is reversed

Click to follow
The Independent Online

J Sainsbury enjoyed the biggest one-day jump in its share price for 12 years yesterday after the grocer reported a modest increase in first-quarter sales, defying expectations of a decline.

J Sainsbury enjoyed the biggest one-day jump in its share price for 12 years yesterday after the grocer reported a modest increase in first-quarter sales, defying expectations of a decline.

The stock closed up 29.75p at 315.25p as 9.5 million shares changed hands, nine times more than usual. That saw Sainsbury's stock market valuation rise £573m to £6.07bn.

Sainsbury's said underlying sales growth from its supermarkets, stripping out petrol sales, was up 0.8 per cent in the first quarter of this financial year. Adding back adjustments for Easter and new space, sales rose 3.7 per cent. Overall group sales, including Homebase, petrol and the US operations, were up 9.2 per cent.

Many analysts had assumed decent trading updates from Sainsbury's rivals recently meant it would be the retail sector's one loser and report falling underlying sales. The shares fell 30p in the weeks ahead of the results.

Sir Peter Davis, the new chief executive, put the performance down to removing bargain buckets and promotional hoardings that had crowded shopping aisles. The group has also been removing non-food items to focus on its core grocery business.

"But some of the performance comes from a fresh approach, from seeking to drive pace into things, give focus and energy, and I think I can take the credit for that," Sir Peter said. "Morale is picking up."

In May Sir Peter said he would not be able to claim credit for any turn around at the group for at least 18 months. He nevertheless drew compliments from all corners of the City.

Jonathan Pritchard, analyst at Morgan Stanley Dean Witter, house broker to rival Tesco, said: "You have to lift your hat off on a day like today. But Sir Peter's still got a big job to do." Kate Calvert of HSBC said: "We need this sort of performance to be sustained. I'd still like to see a bit more theatre in the stores."

Some analysts warned the shares could suffer profit taking this morning. Sir Peter also issued a warning to retail investors on his register. "It's a mistake to look at the share price everyday. We won't have a sustained increase in the share price until the City is convinced we've got to grips with the business," he said.

Comments