Sainsbury down in London penalised by Goldman Sachs downgrade

(Il Sole 24 Ore Radiocor) - Sainsbury's stock fell on the London Stock Exchange, penalised by the rejection by Goldman Sachs. The stock of the UK's second-largest supermarket group, which controls the Sainsbury's Supermarkets chain, plunged more than three points, ending up in the tail end of the FTSE 100 index. Goldman Sachs downgraded Sainsbury from 'buy' to 'sell' and reduced its target price to 335 pence from 390 pence.

Analysts at the US bank warned of a more difficult outlook for Sainsbury's, due to unfolding consumer spending and intensifying competition. Sainsbury's annual results met expectations, with a 5.2% increase in grocery sales and a 3% profit margin, GS noted, adding, however, that the future path looks decidedly more complicated. Analysts rely on the forecast of UK household consumption growth slowing to 0.6% year-on-year, the weakest figure since 2009 excluding the pandemic period, and on GfK's April consumer confidence data which showed an increase in savings intentions.

Goldman Sachs expects retail operating profit to be largely unchanged in the coming year, with growth in the food sector offset by a 2% drop in like-for-like sales at Argos, the miscellaneous goods division of Sainsbury's, compared to 1% growth in the previous year. Analysts signalled the rapid rise of Joybuy, the international e-commerce platform launched by Chinese giant JD.com, as a competitive threat, noting that it had already amassed 300,000 active users by March. GS cut its forecasts for Sainsbury's operating profit for 2027 and 2028 by 4% and 6% respectively, with the new target of 335 pence implying a decline of about 3% compared to the industry average of 14%.