Sainsbury Rises as ‘Doomsday’ Scenarios Avoided: Street Wrap

(Bloomberg) -- Analysts were relieved U.K. grocer J Sainsbury Plc’s earnings were better than expected, after a tumultuous battle to acquire Walmart Inc.’s Asda that ended with the deal collapsing last week.

None of the worst scenarios that the market had been anticipating transpired, such as a reset of price and margin expectations, a new strategy for the company or even a new chief to replace Mike Coupe, Bernstein analyst Bruno Monteyne wrote in a note.

Sainsbury’s shares rose as much as 6.4 percent on Wednesday, the most since the grocer first announced plans to buy Asda in April 2018. Even so, the gain hasn’t been enough to recoup all the losses since the U.K. competition regulator said in a provisional report in February that antitrust concerns created by such a combination would be difficult to address.

Here’s a round-up of what analysts are saying:

Bernstein, Monteyne

(Market perform, PT 250p)

• “None of the doomsday expectations happened” and the company reiterated its strategy
• There’s a new emphasis on store standards, as well as the pricing on commodity products, which Sainsbury thinks can be achieved within the current strategy and margin structure

Berenberg, Dusan Milosavljevic

(Hold, PT 235p)

• FY results were “undeniably strong”
• Berenberg doesn’t see any changes to consensus analyst estimates for now

Shore, Clive Black

(Sell)

• Shore is still concerned about the business, particularly after the optimism surrounding Sainsbury’s potential following the acquisition of Argos in 2016
• Although progress with Argos has been “satisfactory,” Shore is worried about the performance and relative competitiveness of the supermarkets business

To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Jon Menon

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