Sainsbury’s sold off after ‘record breaking’ Christmas

Rob St George 9 Jan 2013 | News - Comment now

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Sainsbury’s sold off after ‘record breaking’ Christmas

Just out of Sainsbury's

Investors have taken their profits from Sainsbury’s (LON:SBRY) strong recent run, pushing its share price down despite a positive trading update.

Over the three months to 5 January 2013 Sainsbury’s saw like-for-like sales, excluding fuel, creep up by 0.9 per cent. This modest increase allowed the supermarket to boast of a ‘record breaking’ 32 consecutive quarters of like-for-like growth.

But Justin King, the retailer’s chief executive, was slightly more downbeat about the outlook for the company. ‘We expect the challenging economic backdrop to persist,’ he said, ‘with customers looking to re-balance their household budget after the festivities and so spending cautiously in the first few months of 2013.’

Shareholders took this as an opportunity to exit the group; the firm’s stock has risen by 10 per cent over the past year, including a 2 per cent jump the day before the update, but the share price contracted by 4 per cent upon the news.

Sheridan Admans, investment research manager at The Share Centre, nevertheless commended Sainsbury’s. ‘We continue to recommend investors hold Sainsbury’s for now, as market conditions are challenging and competition is tough,’ he explained. ‘The business has a strong management track record and for income investors already holding the stock the dividend is well covered at present.’

Phil Dorrell, director of consultancy Retail Remedy, was cheered by Sainsbury’s results too. ‘Taking into account overall market conditions and the fact that Tesco (LON:TSCO) was like a man possessed during the festive period, these numbers are reasonable,’ he remarked. ‘Sainsbury's was fortunate to have hit the festive period running and can now go into the new year proper with a degree of momentum behind it.’

Related topics: Consumer, Equity income, Income investing, Large caps, UK equities

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