Sainsbury’s share price is in the spotlight today after the second-biggest UK supermarket chain published its preliminary annual results. The shares rose to 250p initially and then erased the gains to 235p.
Sainsbury’s news: In a report published today, J Sainsbury said that its grocery sales rose by 7.8% while general merchandise sales rose by 8.3%. Digital sales more than doubled as the number of UK residents shopping online rose amid the pandemic.
The company’s profit before tax declined by 39% to 356 million pounds. In total, the firm made a loss of 261 million pounds because of one-off costs. It generated a free cash flow of 784 million pounds and recommended a final dividend of 7.4 pence. In a statement, Simon Roberts, the CEO said:
“We have a bold three-year plan to put food back at the heart of Sainsbury’s and drive improved performance. We are transforming the way we work and I am encouraged by how all our teams have responded.”
The biggest concern for British supermarkets is whether the recent strong momentum will continue after the country reopens. Also, there are concerns about the remedial costs the companies will have after they boosted their costs last year to deal with the surging demand. Most important, they are battling the fast-growing discount chains like Lidl, Aldi, and Asda. As shown below, the biggest supermarket chains except Sainsbury have underperformed the FTSE 100 this year.
The chart below shows that the Sainsbury share price rose to 250p and then erased those gains as the market digested the earnings. It is trading at 237p, which is the lowest it has been since March this year. On the four-hour chart, we see that the shares moved below the 25-day and 50-day moving averages after the earnings. It also moved below the important support at 238p.
Therefore, in the near term, the shares may keep falling as bears target the next key psychological support of 230p. Another scenario is where the stock bounces back as investors rush to buy the dips or fade the news.
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