Why J Sainsbury plc Is Celebrating Its Worst Christmas In A Decade

Trading conditions during the Christmas period remained challenging for J Sainsbury plc (LON: SBRY)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A quarterly fall in like-for-like sales of 3.9% (including fuel) may not sound like such a great result. After all, the corresponding quarter from last financial year was also a tough one for J Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US). However, it represents a slight improvement over the first half of the year, but yet still equates to the company’s worst performance during the Christmas period for a decade.

A key reason for this is food price deflation, which J Sainsbury warns is likely to continue during the remainder of the financial year. Evidence of this can be seen in the fact that J Sainsbury reduced over 1,000 product prices in the run up to Christmas, with a £150 million investment in pricing helping to boost sales (but not margins) in the most recent quarter.

One major positive for J Sainsbury is the sales growth of its convenience stores, which experienced an increase of 16% in their top line during the quarter. And, with 25 new convenience stores being opened in the quarter, this could help to offset (to an extent) the declining sales of J Sainsbury’s larger stores moving forward. In addition, clothing and general merchandise continues to deliver better sales growth than food, with J Sainsbury’s clothing business increasing its top line by 10% year-on-year.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

As mentioned, J Sainsbury expects food price deflation to continue for the foreseeable future, which is clearly not good news for the company’s bottom line. That said, the market seems to be anticipating such a situation, since J Sainsbury’s share price is flat at the time of writing and its shares trade on a relatively low valuation, which indicates that more challenging quarters are being priced in.

For example, J Sainsbury trades on a forward price to earnings (P/E) ratio of just 10.3, which takes into account next year’s expected fall in profit of 21%. This represents a 30% discount to the FTSE 100’s P/E ratio of 14.2 and, alongside a dividend yield of 4.7%, indicates that there is good value on offer and that J Sainsbury could prove to be a sound long-term buy.

Certainly, pricing pressure looks set to continue during 2015, but with disposable incomes set to rise in real terms in the UK this year, consumer spending could increase and help to improve J Sainsbury’s top and bottom lines over the medium term. As a result, and while trading conditions look set to remain challenging in the short run, J Sainsbury could prove to be worth buying at the present time.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Sainsbury (J). The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »