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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  J Sainsbury plc    SBRY   GB00B019KW72

J SAINSBURY PLC

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J Sainsbury : Asda faces tougher trading conditions after Sainsbury's dream dies

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05/16/2019 | 10:44am EDT
FILE PHOTO: Shoppers leave the Asda superstore in High Wycombe

LONDON (Reuters) - Asda, the British supermarket arm of U.S. giant Walmart, reported a dip in quarterly sales and warned of an "increasingly challenging backdrop" after regulators thwarted its plan to merge with rival Sainsbury's.

Asda attributed the sales decline to the timing of the busy Easter trading period this year - Easter Day was April 21 this year rather than April 1 in 2018.

Walmart said this week that it would look at a stock market listing for Asda after Britain's competition regulator blocked the 7.3 billion pound takeover by Sainsbury's, saying it would mean higher prices for consumers.

The pair had wanted to combine to boost scale and buying power to better compete with market leader Tesco and counter the march of fast growing German-owned discounters Aldi and Lidl, and Amazon.

Asda said its like-for-like sales fell 1.1% in the three months to March 31. That compares with a rise of 1% in the previous quarter and ends a run of seven straight quarters of growth.

However, adjusting for the later Easter, Asda's like-for-like sales, excluding petrol, increased 0.5%, it said.

Asda said its gross profit rate and operating income both declined in the quarter, while higher operating expenses partly reflected costs associated with the failed merger.

"We remain entirely focussed on delivering our strategy, without the benefits the proposed merger with Sainsbury's would have delivered," said Asda Chief Executive Roger Burnley.

He also cautioned: “What has got us here, won’t get us where we need to go – with the rate of change accelerating, we have a tough job to do and need to go even faster."

Burnley's strategy is focussed on lower prices, more innovation in own-brand products, better store standards and improvements in its e-commerce operations.

He highlighted a 10% increase in online grocery sales in the quarter and increased penetration of Asda's own brand products. Asda plans another 80 million pounds of price cuts in the balance of 2019.

STOCK MARKET LISTING?

Of Britain's big four grocers Tesco appears to have the most momentum, having last month reported a 34% jump in full-year operating profit.

However, all of the big four, including No. 4 Morrisons, are still losing market share to the discounters.

The Sainsbury's deal had offered a potential exit route for Walmart from the UK.

When the deal was blocked analysts speculated that Walmart could try to sell Asda to private equity.

However, Walmart, which purchased Asda for 6.7 billion pounds in 1999, said on Tuesday it was "seriously considering" a path to a public listing for Asda, though it cautioned that any preparations for an IPO would "take years".

"We're focussed on continuing to execute the strategy to strengthen Asda's long-term success, including the potential of an IPO at some point in the future," Walmart Chief Financial Officer, Brett Biggs said on Thursday.

"We’ll be thoughtful and measured in our approach," he said.

Separately on Thursday Walmart reported its best comparable sales growth for the first quarter in nine years.

(Reporting by James Davey; Editing by Keith Weir)

By James Davey

Stocks mentioned in the article
ChangeLast1st jan.
J SAINSBURY PLC 0.33% 214.9 Delayed Quote.-18.91%
WALMART INC. -0.04% 117.11 Delayed Quote.25.72%
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Financials (GBP)
Sales 2020 29 038 M
EBIT 2020 849 M
Net income 2020 417 M
Debt 2020 1 136 M
Yield 2020 4,88%
P/E ratio 2020 12,2x
P/E ratio 2021 11,4x
EV / Sales2020 0,20x
EV / Sales2021 0,19x
Capitalization 4 738 M
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Mean consensus HOLD
Number of Analysts 19
Average target price 232,44  GBp
Last Close Price 214,90  GBp
Spread / Highest target 30,3%
Spread / Average Target 8,16%
Spread / Lowest Target -16,2%
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Managers
NameTitle
Michael Andrew Coupe Chief Executive Officer & Executive Director
David Alan Tyler Chairman
Simon John Roberts Director-Retail & Operations
Kevin O'Byrne Chief Financial Officer & Director
Richard Philip Newsome Director-Digital & Technology
Sector and Competitors
1st jan.Capitalization (M$)
J SAINSBURY PLC-18.91%5 895
WALMART INC.25.78%333 236
ALIMENTATION COUCHE-TARD INC19.23%34 409
SM INVESTMENTS CORPORATION--.--%23 556
CARREFOUR10.87%14 590
AVENUE SUPERMARTS LTD3.43%14 431