Sainbury issued a promising trading statement last week but why no mention of margins? It's not alone with all the other multiples reluctant to cover margins in their quarterly updates. Good see that Marks gives them a mention.
Commentary at www.investorschampion.com

The Telegraph -


Short-sellers target Sainsbury's on Tesco fears


The new boss of Tesco is expected to reset margins, which is likely to his rival Sainsbury's

An employee works on a checkout at a Sainsbury's supermarket in Brentwood, Essex, UK

Sainsbury's share price has fallen, while the short interest in the stock has risen since the new boss of Tesco was unveiled Photo: Bloomberg News

By Ben Martin

5:54PM BST 09 Aug 2014



Short-sellers are targeting J Sainsbury amid fears that Tesco’s new chief executive will shake up the supermarket sector by resetting margins.


Since Dave Lewis was unveiled as the new boss of Tesco, the proportion of Sainsbury’s shares out on loan – a proxy for shorting – has risen and is approaching levels not seen since July 2006, when financial data group Markit began compiling its data.


Some 10.5pc of Sainsbury’s shares have been borrowed, up from 9.3pc on July 21, the day Tesco announced that Philip Clarke was being replaced by Mr Lewis as chief executive of Britain’s biggest retailer. Sainsbury’s is the single most shorted stock in the FTSE 100.


“The fear is that incoming CEOs of food retailers often reset margins and clearly there is a knock-on effect for everyone in the market,” said Exane BNP Paribas analyst Andrew Gwynn.


“The reason why people jump on Sainsbury’s is that its balance sheet and operational free cashflow used to be the weakest.”



A host of hedge funds are betting against Sainsbury’s, including Lansdowne Partners, Marshall Wace and Odey Asset Management.

Short-sellers profit from falling share prices by borrowing stock and then selling it, in the hope that they will be able to buy it back at a lower price and pocket the difference.

Sainsbury’s shares have fallen 6.9pc since Tesco unexpectedly unveiled its new boss, while Morrisons is down 4.7pc. The proportion of Morrisons shares on loan has edged up to 7.6pc from 7.2pc during the same period.

While shares in Tesco, which sounded a profit warning at the same time as naming its new boss, have dropped 13.3pc and hit a 10-year low, the percentage of shares that have been borrowed has also dipped to 2.2pc from 2.6pc.

Tuesday tips round-up: Sainsburys, Berkeley Group

Tue, 02 September 2014


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Tuesday tips round-up: Sainsburys, Berkeley Group



Sainsbury (J) Quote more






Price: 294.70

Chg: 5.20

Chg %: 1.80%

Date: 16:40



FTSE 100 Quote


Price: 6,824.18 Chg: 3.86 Chg %: 0.06% Date: 16:48

Sainsbury's full-year dividend pay-out of 17.3p per share is covered almost twice by its earnings. Indeed, the group's chief financial officer thinks the balance sheet is strong, but The Daily Telegraph's Questor team has its concerns. After all, last year's dividend of £320m in cash was part financed by a £222m rise in the company's net debt position. Current market consensus is for a profit margin of 3% in the year ending in March 2016 but a reduction to 1.5% is possible. Hence, a sustainable dividend would be something closer to 8p.

Even if the dividend does not drop that much the direction of travel is still starkly clear. So even though the stock is trading on approximately 10 times forecast earnings - and offering a prospective dividend yield of 5.4% - it still looks like a 'value trap'. "There is little concrete guidance on where the profit and dividend could fall to under new management and until then Questor would rather hold cash." Sell, Questor says.

In the final results (May) the property portfolio was valued at £12b, set against a market value today of around £5.5b, it would appear that SBRY is undervalued.
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Worth a watch next week!

01 Oct 2014 Second Quarter Trading Statement 2014-15

Took the plunge they go ex div (5p) in November, asset backed and Qatar interest thought this a good entry point 251.5p.
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Good luck with that George and presumably there should be a trading bounce at some point, but brokers all seem pretty negative on the stock, though TP's seem to be a little above your entry point.

Merrill Lynch: "Sainsbury’s deteriorating sales performance in recent weeks, as implied by Kantar data, has proven that it is certainly not immune from the structural headwinds occurring in the industry. We see risk to FY15 and FY16 consensus and dividend as we foresee the threat of industry price cuts and deleverage impacting earnings and subsequentlyFCF. As such, the balance sheet remains a concern. Retain U/P.
Unfortunately, the threat of deflation, a lack of volume growth, and stubbornly high level of space growth means that even if Sainsbury’s manages to maintain its market position, it will likely continue to experience negative LFL into next year. Management has guided for FY15 LFL to be similar to the prior year, i.e. +0.2%; however, given its H1 performance (BofAML -2.2%), we would expect this to be revised down at its 2Q IMS next Thursday (Oct 1). We estimate 2Q LFL of -3.1% (implied by Kantar), FY15 LFL at -1.5% (consensus -0.5%) and FY16 LFL of -1.6%.
We lower our FY15 PBT estimate by 2% to £701m on account of our lower sales assumptions, placing us 5% below (company compiled) consensus. Our concern, however, is greater for FY16, when we expect Tesco to act to drive a turnaround in its sales performance. We think this will involve some degree of price investment, following actions by Morrison and Asda and thereby fuelling more industry deflation. We cut our FY16E PBT by 5%, which is 20% below (Bloomberg) consensus.
It is difficult to assess at what point Sainsbury’s would need to raise cash given the lack of disclosure over its banking covenants, and no bonds outstanding. However, on our earnings estimates, we foresee lease adjusted net debt/EBITDAR reaching 4x by FY17E (from 3.3x in FY14), a level that we think would likely be considered unacceptable by management, forcing them to act. A cut to capex and/or dividend is likely, in our view, and we do not rule out a capital increase."

Deutsche summary: "We lower our price target by 17%, in line with our EPS cut, from 330p to 275p. The deterioration in relative sales performance at Sainsbury’s in August and September (Kantar) suggests that the company’s competitive position has been eroded. We believe it needs to invest in its offer in order to recover sales momentum and expect consensus earnings for Sainsbury’s to fall toward our new lower forecasts (17% below consensus on 15/16 EPS) over the next 6 months. Given the lower profitability, we expect dividends to be cut to protect the balance sheet. We cut our DPS estimate by 50% from 17.3p to 8.65p, representing a 3.1% dividend yield on our 275p PT. We rate SBRY Hold.

Thanks for that H, it does make for depressing reading and SBRY are a gnat's whisker off their 5 year low, how much bad news is in the price I don't know, but experience tells me that decent co's recover and SBRY imo fall into that catagory. Market share is being taken it's true, divi may be cut next year, and margins will fall, what better time to invest. I've allotted about 60% into these, so I have scope if necessary.
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Just a little bit more if you are interested:
Santander: "We are now forecasting Sainsbury’s dividend to be cut 28% in 2015/16 to restore cover to 2x. Tesco announced a 75% reduction last month, and we forecast Morrison to halve its FY dividend. Following this week’s Kantar data, we have lowered our EPS forecasts by 12% and 20% for 2014/15 and 2015/16, respectively, and see continuing pressure on consensus (we are 10% below Bloomberg 2015/16 EPS consensus). With very poor visibility and the prospect of a deteriorating market, as well as questions over property valuations given structurally weaker margins, we lower our recommendation to Underweight and cut our DCF/peer comp-derived target price to 250p."

Barclays: "Sainsbury has been our preferred name in the UK for some time, a choice driven primarily by its consistent market share gains. However, recent trends have been much less convincing and we expect a weak 2Q LFL number next week (-3.4%). Possibly the company’s FY guidance might be revisited. We cut our sales and margin estimates to reflect the tougher environment and Sainsbury’s weaker share trends. But even with quite significant cuts, the stock is trading at a clear discount to peers despite (still) better sales trends. If sales trends deteriorated further then we would lose our appetite for the stock, but the sharp recent fall (-16% in the last month) seems to fully incorporate next week’s difficult trading statement. We reiterate our Overweight rating but cut the target price to 300p."

Cheers (perhaps not the right term) HARRYCAT, I like Barclays best, ha!ha!
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Trading Statement

Second Quarter Trading Statement for 16 weeks to 27 September 2014

Second quarter sales impacted by deflationary environment

· Total Retail sales for second quarter down 0.8 per cent (ex fuel), down 2.3 per cent (inc fuel)
· Like-for-like Retail sales for second quarter down 2.8 per cent (ex fuel), down 4.1 per cent (inc fuel)
· Total Retail sales for the first half flat ex fuel (down 1.4 per cent inc fuel) and like-for-like sales down 2.1 per cent ex fuel (down 3.4 per cent inc fuel)

oops!
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Oh dear.

At a time when I'm looking for support, sympathy and understanding, I'm afraid 'Oh dear' just doesn't cut it mitzy.
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Good job it's only money.
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We all shop in these big supermarkets and can see things happening.

A few years ago we were already shopping in Aldi but we never saw any of our snobby neighbours there when we went.

I would have thought that these big supermarket sales outlets with massive footfall, great buying power, excellent logistics and tons of money should be able to bounce back and wipe the floor with the average Aldi or Lidl - and do it any time soon too.

It is going to be very interesting to watch it happen when it does so. I think it will need a different type of senior manager and essence to the scum bag t***s who are runnning things now. Some of them are already out of the door and more will follow so changes will happen for the good. The stock price improvements will follow.

I think SBRY now have to be a bid target just for the potential.
I think TSCO now have to be a bid target just for the potential.
I think MRW now have to be a bid target just for the potential.

One of the three above might just be right. ;-)

By Graham Ruddick9:00PM GMT 08 Nov 2014Comments5 Comments
J Sainsbury is to scrap a giant programme of store openings and slash its dividend, as part of a dramatic overhaul drawn up to fight falling sales.
The supermarket giant will this week unveil the results of a strategic review, which is expected to reveal that Sainsbury’s is reining in costs in an effort to save cash and shore up its balance sheet.
The measures are intended to allow Sainsbury’s new chief executive, Mike Coupe, to invest in lowering prices as well as expanding the company’s online, convenience store and clothing businesses, which are performing well.
Sainsbury’s sales are falling for the first time in decade as Britain’s “big four” grocery retailers fight shifts in shopping habits and the rise of the discounters Aldi and Lidl.
Mr Coupe replaced Justin King in July and told the City last month that he was conducting a strategic review. He will present the results of the review alongside the company’s interim results, which the City expects to show a 12.5pc fall in underlying pre-tax profits to £350m.
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There has been speculation in the City that Sainsbury’s could launch a rights issue to fund a new strategy, but the company is understood to have ruled this out. Instead, it is likely to protect its balance sheet against falling profits by cutting the dividend, potentially by as much as a third.
It is understood that Mr Coupe will also slash capital expenditure and Sainsbury’s new store openings. Sales in large out-of-town supermarkets are falling and Sainsbury’s wants to focus on opening smaller convenience stores.
John Kershaw, analyst at Exane BNP Paribas, said that Sainsbury’s might cut the amount of space it opens by a third. He expected Sainsbury’s to open less than 500,000 sq ft of new selling space in the next financial year, down from 750,000 sq ft this year.
If the company mothballs sites earmarked for new supermarkets then it might be forced to writedown the value of land on its balance sheet.
Clive Black, an analyst at Shore Capital, said Sainsbury’s might cut capital expenditure from just below £900m this year to between £550m and £600m in future.
Mr Black said: “We expect Sainsbury’s to join Asda and Morrisons in becoming more in touch with its customers through a re-allocation of resources from a lower cost base with constrained capital outflows and potentially lower dividend flows.
“For now, as is the case at Tesco, we suspect customers must take precedent over shareholders and other stakeholders in the food system.”
Allan Leighton, the former boss of Asda, said the main problem facing Britain’s grocery retailers was that they have too many stores.
Mr Leighton, who led a turnaround of Asda in the 1990s alongside Archie Norman, said: “In the end, they have too many stores. I think there is a structural thing, but there are also too many stores.”
Tesco’s market share peaked in 2007, but since then it has expanded its shop space by the same area as the whole of Morrisons today.
Mr Leighton also questioned the product range in the big four supermarkets, saying it had become too large and made it “harder to shop”.
He was speaking in an interview as chairman of Matalan, which is growing its out-of-town business but has also opened its first high street store in Cardiff.
Mr Leighton dismissed comments from the supermarket industry that shoppers were turning against out-of-town shopping. He added: “Out of town is very strong.”

Week ahead: Sainsbury's back in the news with latest half year numbers
By Andrew Neil
November 09 2014, 7:00am


One of the UK's big supermarkets Sainsbury's (LON:SBRY) will be back in the news this week, when it reports its first half results on Wednesday.

It comes after the group launched last week a joint venture with a Danish partner to open Netto cost saving stores.

New chief executive Mike Coupe faces a baptism of fire as the supermarket has been forced to slash prices as a shift towards convenience shopping and fierce competition has hit sales.

US broker Jefferies says the firm remains the ‘most vulnerable of all UK grocers’ but expects first half profits to be helped by the supermarket’s bank and ‘contained’ gross margin investment.

The broker repeats a ‘hold’ recommendation and target price of 250p. Shares were trading at 245.5p on Friday.

Having sold its stake in stake in Verizon Wireless earlier this year, investors have been keeping an eye on Vodafone (LON: VOD), which reports interims on Monday.

The telecoms business has had to plough vast sums in organic investment and acquisition activity to resuscitate its lagging European operation.

This is facing convergence competition from major players and price competition from smaller ones.

Interims tomorrow, confortably in profit atm and some of the prospective drawbacks such as dividend may be cut by 1/3 have been aired, so that won't come as a surprise.
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Interim Results

Financial summary
· Underlying Group sales(1) (inc VAT) down 0.3 per cent to £13,916 million (2013/14: £13,953 million)
· Retail sales (inc VAT, ex fuel) flat year-on-year
· Like-for-like sales (inc VAT, ex fuel) down 2.1 per cent
· Underlying profit before tax(2) down 6.3 per cent to £375 million (2013/14: £400 million)
· Underlying basic earnings per share(3) down 12.7 per cent to 14.5 pence (2013/14: 16.6 pence)
· Return on capital employed(4) of 11.1 per cent (2013/14: 11.4 per cent)
· Return on capital employed excluding pension fund deficit of 10.3 per cent (2013/14: 10.5 per cent)

Statutory
· Group sales (ex VAT, inc fuel) down 0.1 per cent to £12,667 million (2013/14: £12,684 million)
· Items excluded from underlying results total a charge of £665 million (2013/14: £33 million profit), including an impairment and onerous contract charge of £628 million (2013/14: £92 million)
· Loss before tax of £290 million (2013/14: £433 million profit)
· Basic loss per share 18.0 pence (2013/14: 17.9 pence per share earnings)
· Interim dividend 5.0 pence per share (2013/14: 5.0 pence per share)

Highlights from our Strategic Review

Evolving to win
· The grocery sector is undergoing structural change as customers shop more frequently, using online, convenience and discount channels more. We expect supermarket like-for-like sales in the sector to be negative for the next few years, but we have robust plans to address this challenge
· In challenging market conditions, Sainsbury's has delivered relative outperformance in sales and profit for the past five years
· We have listened to our customers and are evolving our strategy from a position of strength to meet their changing needs. We will build on our strong values, differentiated offer of quality products and services, competitive value proposition, advantaged store portfolio, established convenience and online businesses, great colleague service and our unique understanding of our customers

Great products and services at fair prices
· We will improve the quality of 3,000 own-brand products, focusing on the categories which matter to our customers
· We will invest an additional £150 million in price, of which approximately half will fall in the second half of 2014/15 and the remainder in the first half of 2015/16, focused in areas where our customers tell us price matters most
· We will always be competitive on price versus our main supermarket peers. We will work in close partnership with suppliers to deliver value chain efficiencies which can be reinvested in price
· We will continue to grow our non-food business with a focus on design-led clothing, cookware, homeware and seasonal products - increasing our non-food space in supermarkets and rolling out clothing online in 2015
· We are on track to deliver sales and profit growth at Sainsbury's Bank and have opportunities to expand the Bank's product portfolio

There for our customers
· We will open 500,000 sq ft of space in each of the next two years, followed by 350,000 sq ft in 2017/18. This will include eight new supermarkets over that period. It also includes four replacement stores, three of which are mixed-use developments, unlocking significant property profits. Over half of our new space will be convenience stores as we continue to target opening 100 convenience stores per year
· A review of our supermarket estate has concluded that:
- Around 75 per cent of our stores are in the right locations and are of the right size for our food and non-food offer and we will pilot new formats focused on optimising range, layout and ease of shop to meet changing customer shopping patterns
- Over the next five years, around 25 per cent of our store portfolio will have some under-utilised space which can be used to expand our non-food offer or for other purposes such as carefully selected concession partnerships
· We will continue to invest in groceries online to further improve our website and the customer experience, trialling new ways for customers to order and acquire their groceries, including click and collect

Colleagues making the difference
· We will improve our customer experience through continued investment in colleague training and new user-friendly technologies, for example through the roll-out of 'CAM', an automated availability tracking tool which reduces cost and improves on-shelf availability throughout the day

We know our customers better than anyone else
· We will invest in the systems infrastructure to create a single view of our customers, helping us to become increasingly effective in our customer interactions

Our values make us different
· Our values remain a key component of our differentiated offer and we will continue to invest in areas that matter to our customers

Maintaining balance sheet strength
· We will deliver total operating cost savings of £500 million over the next three years. This represents annual operating cost savings in the range of £150 million to £175 million, a step up from recent levels.
· We will reduce capital expenditure to between £500 million and £550 million per annum over the next three years, approximately two per cent of sales
· We maintain our interim dividend at 5.0 pence per share for 2014/15 and will fix dividend cover at 2.0 times our underlying earnings for 2014/15 and over the next three years
· Given the price investment announced today, combined with the outperformance of both the Bank and cost savings in the first half that we do not expect to be repeated in the second half, Sainsbury's expects profitability to be lower in the second half than the first half

After a brief venture in the 220's SBRY has recovered somewhat, the uncut interim divi of 5p goes ex div next thursday, finished strongly at the end of trading today. Possible it will advance early next week as income seekers buy for the divi.
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