Sainsbury’s Q1 earnings preview: where next for Sainsbury’s shares?

Sainsbury’s releases a quarterly update this week that will reveal how sales have fared since the wider economy, including restaurants and pubs, reopened in April. We explain what to expect as interest in the UK supermarket sector rises.

Charts (4)

When will Sainsbury’s release Q1 results?

Sainsbury’s will release first-quarter results on the morning of Tuesday July 6. This will cover the three months since the end of its last financial year on March 6.

What to expect from the Sainsbury’s results

Sainsbury’s quarterly updates only focus on sales growth and don’t usually provide hard revenue figures. While evidence suggests that grocers have continued to benefit from strong growth even as restaurants, pubs and other venues have reopened as lockdown eases, Sainsbury’s has warned it will be coming up against strong comparatives from last year when demand exploded as the pandemic erupted.  

Still, the latest data from Kantar suggest Sainsbury’s delivered 10.2% sales growth over the 12 weeks to June 14, reported to be driven by its strong online offering and its convenience stores and giving an idea of how it performed. Still, that trailed the 12.1% growth at Tesco and the 10.5% growth at Morrisons but was ahead of Asda’s mild 6.3% rise in sales.

Notably, Tesco, the UK’s largest supermarket, has set the tone after publishing its first-quarter results last month covering a slightly different timeframe of the three months to May 29. The company said like-for-like sales were up 8.1% compared to pre-pandemic levels, implying demand has remained strong even as the wider economy reopens, but was only up 1% from the previous year as strong comparatives came into play.

Investors should also watch for any adjustments made to the outlook. Sainsbury’s said earlier this year that it agreed with the consensus among analysts that it can deliver underlying pretax profit of around £620 million in the current financial year. That would compare to the £356 million delivered in the last financial year and the £586 million booked the prior year before the pandemic hit.

Beyond that, Sainsbury’s update is likely to focus on how it is progressing with its new plan introduced last November. This is seeing the supermarket invest in its product range and online offering, build on the potential of its Nectar loyalty programme, transforming Argos into a leaner business with a wider catalogue of goods, rebuilding its home brand Habitat and cutting costs across the group.

The update comes as interest In the UK supermarket sector heats up following the bidding war that has started for Morrisons. Having turned down a £5.5 billion offer from Clayton, Dublier & Rice last week, it has now accepted a £6.3 billion offer from a rival consortium of investors, who are keen to tap-into Morrison’s large freehold property estate and supply chain that sees it make more of its own food compared to its rivals. With another private equity group, Apollo, also stating that it could be the third firm to make an offer for Morrisons, there are signs that the strong appetite for the sector could look at other players in the market if they are unable to snap-up Morrisons.

Where next for the Sainsbury’s share price?

Sainsbury’s has been trending higher since late September. It trades above its 50 & 100 sma on the daily chart and above its multi-month ascending trendline showing an established bullish trend. 

The RSI is supportive of further gains whilst it remains out of overbought territory, after which some consolidation or an easing back in the price could be on the cards. 

Immediate resistance can be seen at 280p a level last seen on early 2019, followed by 300p the round number and a level also from early 2019.  

It would take a move below 250p for the near-term uptrend to be negated and a move below 245p the 100 sma and ascending trendline could see sellers gain traction towards 235p.

How to trade Sainsbury’s shares

You can trade Sainsbury’s shares with City Index by following these four easy steps:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘Sainsbury’s’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade 

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