Friday 20 April 2018

Sainsbury's reports first quarterly sales growth in two years​

Supermarket Sainsbury's
Supermarket Sainsbury's

James Davey

Sainsbury's, Britain's second biggest supermarket, on Tuesday beat expectations with its first quarterly underlying sales growth in over two years, potentially helping its takeover approach for Argos-owner Home Retail.

The firm, which is embroiled in a two-way bid battle for Argos, said sales at stores open over a year rose 0.1 percent, excluding fuel, in the nine weeks to March 12, its fiscal fourth quarter.

That compared to analysts' forecasts in a range of flat to down 0.6 percent and a third quarter decline of 0.4 percent.

Sainsbury's, which has shown greater resilience to competition from discounters Aldi and Lidl than its big four rivals - market leader Tesco, Wal-Mart's Asda and Morrisons, said it expected the market to remain competitive as food deflation continues to impact sales growth but was confident it would outperform its major peers.

Sainsbury's needs to support its share price, given that over half its proposed offer for Home Retail is in equity. Both it and fellow Home Retail suitor, South African group Steinhoff International, have until Friday to make a firm bid or walk away.

Frankfurt-listed Steinhoff, which already has a retail presence in the UK through Bensons Beds and the Harvey's furniture chain, proposed an all-cash offer of 175p for each Home Retail share last month.

That trumped Sainsbury's earlier cash and shares approach, worth 173p at Monday's closing share price.

Last week Home Retail reported improved trading at Argos and said its year-end cash balance would be about £625m, some £100m ahead of analysts' forecasts - factors that will have to be taken into account in any raised offers.

Under UK takeover rules, whichever company bids first triggers a 53-day extension for their rival, effectively creating a "game of chicken" as each weighs up a bid.

Shares in Home Retail have jumped nearly three quarters since news of a possible bid from Sainsbury emerged on January 5.

They closed Monday at 181.5p, valuing the firm at £1.49bn and indicating the market expects an increased bid or bids.


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