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Where now for Sainsbury’s share price as it unveils new strategy?

Last week, Sainsbury’s laid out its ‘Plan B’ in the wake of its failed Asda merger which will see it consolidate hundreds of supermarkets and Argos stores and significantly reduce costs and debt.

Sainsbury's source: Bloomberg

Sainsbury’s announced its ‘Plan B’ strategy to restore growth after its failed Asda merger that will see it close 125 supermarkets and Argos stores and open 200.

The supermarket chain will also stop selling new mortgages and plans to significantly reduce costs and the amount of debt on its balance sheet as part of its new strategy.

Its three-year net debt reduction target increased to at least £750 million from £600 million, with Sainsbury’s looking to reduce its debt pile by at least £300 million in FY19/20.

Since announcing the new strategy, Sainsbury’s share price has rallied 2% to 221p a share as of 11:15 GMT on Tuesday.

Technical analysis from our experts

'To understand the current technical position for Sainsburys, it makes sense to look at things from a long-term perspective, utilising the monthly chart. The past four-months have seen a number of attempts to break below £1.88, and while we have seen it breached, each occasion has failed to hold.'

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Sainsbury’s looks to expand its value brands to drive sales

Sainsbury’s said that it remains focused on reducing prices on every day food and grocery products and expanding its range of value brands, which continue to be popular with consumers.

"Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in Grocery,’ Sainsbury’s CEO Mike Coupe said in its second quarter results.

‘At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability,’ he added.

Second quarter total retail sales up 0.1 per cent (excluding fuel), with grocery sales up 0.6% and clothing sales up by 3.3%.

Argos has continued to grow market share, but sales were impacted by reduced promotional activity and the timing of new gaming and toy releases.

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Sainsbury’s warns investors of half-year profit dip

The supermarket chain warned investors that it expects first-half underlying profit to fall by around £50 million year-on-year, blaming cost savings, unseasonal weather and higher marketing costs for the decline.

However, the company left its full-year guidance unchanged, with it expecting a strong performance in the second-half of the financial year.

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