Mindful Money’s Monday share tips: Sainsburys and M&S

6th January 2014

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In 2014’s first full week of trading it is the retailers falling under the spotlight with both Marks & Spencer and Sainsbury delivering market updates writes Philip Scott.

Supermarket giant Sainsbury reports its third quarter trading update on Wednesday and broker sentiment is anticipating that the group’s record of 35 consecutive quarters of positive like-for-like or same store sales growth is likely to come to an end.

The past year has seen the group’s shares move up by 11% but over the last three months they have slide back by 4%. In its upcoming report, a fall in like-for-like sales in the region of 0.5% is currently forecast as promotional activity by rivals, along with the ongoing expansion of discounters such as Aldi may have impacted asserts Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers. He says: “Nonetheless, profit expectations for the full year are expected to remain unchanged, with the retailer to date having avoided aggressive promotional activity. Prior to the update, and with sales still expected to fall less than major rivals such as Tesco, analyst opinion currently points towards a ‘hold’.”

Following with its own third quarter trading update on Thursday is Marks & Spencer. Its shares have endured some volatility, rising by 14% over the past year and dropping by 11% over the last three months. Analysts currently predict full year pre-tax profit in the region of £655m, a fall of some 1.5% on last year, and as with Sainsbury, the consensus opinion among brokers currently denotes a ‘hold’.

Bowman says: “Promotional activity, particularly for its currently pressured General Merchandise business, continues to cast a shadow over analyst forecasts for current full year profits. Management’s relatively late push to capture online sales, combined with its struggle to attract younger consumers, also provides ongoing concern.”

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