J Sainsbury PLC

United Kingdom-based J Sainsbury PLC (SBRY) is a British chain of supermarkets. The group involves grocery-related retailing and retail banking with interests in property as well. The group's brands comprise Sainsbury's groceries, Sainsbury's Home, Argos, Sainsbury's Bank, Tu, and Habitat. The company's operations are differentiated into four operating segments: Retail - Food, General Merchandise and Clothing, Financial Services & Property Investment.

Financial Highlights (for the 28 weeks to 21 September 2019, £million)

(Source: Interim Reports: Company Website)

In Grocery market share, the company showed a positive momentum. For the first half of 2020, the underlying group sales, including VAT, decreased by 0.2% to £16,856 millionas compared with the corresponding period of the last year, while like-for-like sales (including VAT, excluding fuel), reduced by 1%. In H1 FY20, the underlying profit before tax decreased by 15% to £238 million against the £279 million in H1 FY19, driven by the combined effect of the phasing of cost savings, tough weather comparatives, and higher marketing costs. The underlying basic earnings per share declined by 16% to 7.9 pence as compared with the same period of the last year. Retail free cash flow surged by £81 million to £698 millionversus the same period in the previous year. The net debt for the first half of 2020 was £6,778 million,a decrease of £568 million from the previous year (H1 FY2019: £7,145 million). Interim dividend per share increased by 6 per cent to 3.3 pence in H1 FY20.

Share Price Performance

Daily Chart as at November-07-19, before the market closed (Source: Thomson Reuters)

On 7^th November 2019, J Sainsbury PLC shares were trading at GBX 205.20 at the time of writing before the market close (at 1:20 PM GMT), down by 0.15% against the previous day closing price. Stock's 52 weeks High and Low are GBX 327.25/GBX 177.05. The company's stock beta was 1.01, reflecting the same volatility as compared to the benchmark index.

Conclusion
The company has generated decent momentum across all the business. The company has lowered prices on everyday groceries and food and launched an array of value brands. On a year on year basis, the client satisfaction has significantly increased.

In the Retail market segment, the consumer outlook stays uncertain, and the company stay highly competitive.However, as guided in September 2019, the company anticipate profits in H2 FY20 to benefit from the annualization of the previous year’s colleague wage surge and normalisation of weather comparatives and marketing costs.

The company has also introduced 123 new value brand products. In the financial year 2020, the company will improve 200 convenience and 450 supermarkets stores.

The company have set out the plan to build one multi-brand, multi-channel business. This will produce the combined Argos and Sainsbury’s proffer much more approachable for clients and provide them with the prospect to make the enterprise more effective.

Moreover, the grocery, clothing and general merchandise markets remained very competitive and marketing-centred industry with straining on the margins. Fluctuations in the commodity and foreign currency rates can increase input costs which the group may not be able to pass on to the consumers.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 23,775 million in FY15 to GBP 29,007 million in FY19. Compounded annual growth rate (CAGR) stood at 5.10 per cent.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 205.20 (as on November 07, 2019, before the market closed).

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