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Shares in Sainsbury’s have been on a tear since mid April, but they gathered further momentum in November when management revealed interim underlying retail operating profit of £504mn, well ahead of its own expectations.
Three insiders at the grocer — Patrick Dunne, Rhian Bartlett, and Bláthnaid Bergin — recently derived material benefit from the run-up in the share price, having collectively offloaded £2.8mn worth of shares between November 14 and 18. Bergin, Sainsbury’s finance chief, continues to hold an interest in 466,134 shares after selling (via a closely associated person) roughly one-third of her holding at around 320p apiece.
The group, along with its high street counterparts, can expect a degree of support from investors who are nervous over current markets valuations and prospects over discretionary budgets in the wake of the autumn Budget. The degree to which the market will gravitate towards defensive stocks is difficult to gauge, especially given that we could witness slower growth rates compared with recent years.
Increased price sensitivity among consumers is already constraining discretionary household budgets, but short of another quarter point cut in interest rates, it’s conceivable that the market backdrop will become increasingly favourable for the more value-conscious German grocers.
Nonetheless, sentiment towards Sainsbury’s (at least among traders) was boosted by a positive technical signal midway through June, coupled with news that the grocer had achieved its highest market share in almost a decade. In addition, the forward rating of 3.4 times on an enterprise/cash profit basis compares favourably with both Marks and Spencer and Tesco. And the stock also comes with an implied forward dividend yield (ex-special) in advance of 6 per cent.