Sainsbury's to produce update

Sainsbury’s will release a trading statement on Wednesday 1 October — traders are on edge given the profit warnings from Tesco.

Sainsbury's store
Source: Bloomberg

Sainsbury's is trading at 253p. The share price is down 22% since the company revealed a 1.4% decline in full-year profits to £788 million in May. The decline in profits was attributed to the sale of properties, and underlying profits actually rose by 6.2%. Total revenue ticked up by 4.6% to £25.6 billion, with the non-food section performing particularly well, exceeding sales of £1 billion for the first time. The full-year dividend was increased by 3.7% to 16.7p.

The trading statement could be guidance as to what the first-half figures will be like on 12 November 2014, where analysts are expecting a first-half revenue of £12.49 billion. Dealers will be paying close attention to the trading statement in light of the ongoing price war led by Morrison WM Supermarkets and the profit warning and accountant scandal from Tesco.

Equity analysts are moderately bullish on Sainsbury’s. Out of the 24 recommendations, six are buys, 11 are holds and seven are sells.

Sainsbury’s share price is at multi-year lows. The update would have to be very positive in order for the stock to hit 284p, but if the statement is soft the stock could target 200p.

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