The private equity bid for Morrisons has triggered a guessing game over who else might be in the cross hairs of hungry predators.
Top of the list for some is rival supermarket chain Sainsbury’s. Shares are up more than 20 per cent this year, giving it a value of over £6billion.
So there will be much interest in the grocer’s first quarter trading update on Tuesday, which will cover three months since its financial year ended on March 6. That period, of course, coincides with the easing of lockdown restrictions and the rollout of vaccines.
Investors will want to know how that has affected Sainsbury’s. Are shoppers returning to stores rather than shopping online? Are they buying less each time they shop? Has the reopening of pubs and restaurants hit demand as more people eat out rather than cook at home?
‘With the economy opening back up, the nation’s drift back to dining out might eat into its revenues,’ says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. ‘ONS figures showed that there was a 5.7 per cent fall in retail food sales in May.’
Costs will also be an issue. While sales soared last year due to lockdowns, the cost of operating safely through the Covid crisis dented its bottom line, with profits falling 39 per cent.
Investors will want to know if those extra costs are starting to fade and whether this will boost margins and profits.
‘We should find out if a revival of fortunes has materialised in the upcoming trading update,’ says Streeter. ‘Underlying profits are forecast to grow, and the grocer says it’s comfortable with consensus expectations of £620m.’
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