Sainsbury’s slips on faltering sales By Geoff Foster
HUNGRY bears continued t o gorge themselves on J Sainsbury amid growing concern that Wednesday’s second-quarter trading statement could contain an unsavoury full-year profits warning.
If so, that could leave new £900,000-a-year chief executive Mike Coupe with no option but to slash the dividend. The shares cheapened 2.6p more to a year’s low of 258p to stand 40pc below last November’s high of 428p.
Grocery shares have been trashed since Tesco’s shocking admission it had inflated its accounts to the tune of £250m.
Research by Kantar this week showing further market share losses to the foreign discount retailers, Aldi and Lidl, exerted further downward pressure on the UK majors.
Sainsbury’s market share fell 1.8pc to 16.2pc over the past 12 weeks and it has now apparently seen six months of falling sales in the past nine.
Dealers believe matters could get a lot worse should a beleaguered Tesco, 2.4p easier at 192.5p, decide to spark another damaging price war. New chief executive Dave Lewis, who came from Unilever, has an enormous job on his hands in trying to ‘create value for customers and shareholders’ and restore the City’s confidence in the stock.
Meanwhile, foreign discounters go from strength to strength. German supermarket chain Aldi recently announced plans to double the number of its stores in the UK and hopes to open its 1,000th store in 2021.
Ever since Terry Leahy retired from Tesco in March 2011, it’s been downhill for shareholders. The cosy in-house appointment of Philip Clarke to replace him turned out to be a disaster, with profit warnings commonplace and eventually forcing Clarke to walk the plank in July. Weeks later and Tesco is faced with the biggest crisis in its history.
As one sceptical fund manager put it: ‘It’s got to be a major worry that as soon as a new “outsider” boss comes in and kicks the tyres, he finds a massive pothole.’
Following Justin King’s decision to quit Sainsbury’s in January after a successful tenyear tenure, the board also decided to recruit from within. International and IT director Mike Coupe stepped into the lion’s den and so far has found the going tough. Major shareholders were said to be underwhelmed by his appointment and this time next week they could well be on his back.
Broker JP Morgan slashed its target price for Sainsbury’s to 225p from 280p and rival Deutsche to 275p from 330p.
Down a hefty 41pc from January’s peak of 1565p, Hargreaves Lansdown dropped a further 40.5p or 4pc to a year’s low of 923.5p. Nervous sellers have driven the price down amid fears that regulation could increase the cost of doing business and reduce investor appetite for the group’s financial services.
Broker RBC Capital Markets downgraded to sector perform but said HL remains a quality company with no debt.
The Footsie took a turn for the worse, closing 66.56 lower at 6639.71. Already in the red following Bank of England boss Mark Carney’s warning that a UK interest rate rise is getting closer, selling accelerated towards the close after Wall Street nosedived 200 points-plus in early dealings.
The Street of Dreams was hit by US data showing durable goods orders declined by 18.2pc in August, the largest drop since records began in 1992.
Buyers boarded discount airline easyJet, 35p higher at 1,350p, on hopes that Friday’s pre-close trading update will please.
Shire rose 55p to 5240p after the Wall Street Journal predicted that the agreed bid from AbbVie will succeed. Changes to US tax inversion laws earlier this week had raised doubts about whether it would go through.
Courier group UK Mail delivered a profits warning and crashed 75p to 490p. The com- pany said first-half revenue would be lower than last year due to worse-than-expected second- quarter parcel volumes, casting uncertainty over annual profits.
In parcels, average daily volumes for the first half are set to rise some 6pc against the same period last year, driven partly by more home deliveries related to online shopping, although parcels volume growth continued to moderate.
UK Mail’s cautious comments on the parcels market dragged Royal Mail down 14.4p further to a year’s low of 400p and some 35pc below its post-flotation peak of 618p.
CSR, the former Cambridge Silicon Radio chipmaker, jumped 36.5p to 765p on hearing that the UK Takeover Panel had granted its US bidder Microchip Technology an extension on the September 25 deadline governing how long it has before it must either put up or shut up. Microchip’s approach in August was rejected and it now has until October 15 to decide.
SYQIC, which provides online TV and on-demand paid video content, advanced 4.5p to 63.5p after reporting its trading performance in 2013 was ‘strong’ and in line with expectations. Interim pre-tax profits advanced to £0.96m from £35,000 on revenues over 400pc higher at £4.59m. The company had net cash of £0.45m at the end of June and raised £1.85m via a placing of 3.7m shares at 50p a pop in August.