By Scott Wright
THE boss of J Sainsbury has declared the company has not received any takeover approaches amid growing interest in the supermarket sector from private equity players, as the grocery giant raised its profit expectations for the year.
Simon Roberts was commenting as takeover talk continues to swirl around rival Morrisons, with private equity giant Apollo Global Management emerging as a third potential suitor for the Bradford-based chain on Monday.
On Saturday, the Morrisons board recommended that shareholders accept a £6.3 billion bid led by Fortress Investment Group, having thrown out a £5.5bn approach from New York-based Clayton, Dubilier & Rice in June.
Speaking as Sainsbury’s lifted profit expectations o “at least £660 million” for the year to March 2022 – an upgrade on the consensus forecast of £620m in April – Mr Roberts said the company had not received any takeover advances itself.
However, he expressed the view that the grocery sector was undervalued – a factor analysts have credited with sparking the recent spurt of private equity interest in the sector. Last month, the competition watchdog approved the £6.8bn, private equity-backed acquisition of Asda from Walmart by petrol forecourt operators the Issa brothers.
The watchdog blocked a proposed merger between Asda and Sainsbury’s in 2019.
“Sainsbury’s, which has itself previously been the subject of bid interest, may again be drawing covetous glances based on its recent performance, with a slight decline for Argos as it loses the one-off benefit of people shopping for home working equipment the only real fly in the ointment,” said Russ Mould, investment director at AJ Bell, commenting on Sainsbury’s first-quarter trading update yesterday.
Sainsbury’s beat forecasts to report a 1.6 per cent rise in like-for-like sales, excluding fuel, for the 16 weeks to June 26. Grocery sales grew by 0.8% and were said to have benefited from Covid-10 restrictions, which meant people were spending more time at home.
General merchandise sales dipped by 1.4% as a result of comparisons with last year’s “elevated levels”, though were ahead of expectations.
While Sainsbury’s and its rivals saw sales rise during periods of lockdown last year and early this year, the grocer warned yesterday that it has “tough comparables ahead as restrictions continue to ease and customer behaviour normalises”.
However, it said that “online remains very popular”, reporting that it accounted for 18% of grocery sales during the quarter versus 8% in the first quarter of last year.
Sainsbury’s announced a £50 million investment yesterday in further price reductions, which it said would be applied to “60 everyday essentials” such as strawberries and potatoes.
The grocer declared it was seeing “encouraging early results” from its Sainsbury’s Quality, Aldi Price Match campaign, adding that its value index had improved against Aldi quarter-on-quarter.
Argos sales were up 6.7% on a two-year basis. Although this was ahead of expectations and guidance, it was down compared with the “tough comparatives” of spring 2020, when competitors were closed because of lockdown and good weather brought seasonal sales forward.
Mr Mould added: “A year into his tenure and chief executive Simon Roberts is sitting relatively pretty but the supermarkets space is an extremely competitive and demanding one so there is no room for complacency, particularly given the uncertainty over the direction Morrisons will take under its new ownership.”
Mr Roberts said: “We continue to make good progress against our plan to put food back at the heart of Sainsbury’s and have good momentum within the business.
“Our colleagues are doing a brilliant job of giving great customer service and continuing to adapt as restrictions ease and shopping habits change. Over the coming months we expect to see customer shopping patterns normalise further and we are well set up to serve them however they want to shop.”
Meanwhile, Mr Roberts said customers will no longer need to wear masks from July 19, the date branded “freedom day” in England when all coronavirus restrictions are scheduled to be lifted.
He said he would consult with staff on their views but said the decision to wear one would be down to individual choice.
Mr Roberts: “We’re all absorbing the latest news last night and thinking through our response. There are two very distinct points of view. ”
Shares closed up 1.6p at 279.8p.
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