J Sainsbury plc (GB:SBRY) shares are down 4.7% in early morning trade at the time of writing after the British supermarket’s Q3 update failed to impress shareholders. Sainsbury’s provided its trading update for the 16 weeks ending January 6, 2024 (Q3 FY24) and the Christmas season (six weeks ending on January 7). A persistent inflationary environment dented consumer sentiment during this Christmas season, although grocery volumes continued to offset the general merchandise declines.
FTSE 100-listed Sainsbury’s is the second-largest supermarket chain in the U.K., offering groceries, merchandise, clothing, and electronics. It operates through three main units: Sainsbury’s Supermarkets Ltd, Sainsbury’s Bank, and Argos. SBRY shares have gained 30.6% in the past year.
Sainsbury’s Q3 FY24 Performance
In Q3 FY24, Sainsbury’s Grocery sales grew 9.3%. General Merchandise sales at Argos fell 0.9% but rose 0.9% at Sainsbury’s GM. Also, Clothing sales declined 1.7% from the prior year’s comparative period, which witnessed robust demand. Overall, like-for-like sales (excluding fuel) grew 7.4%.
Additionally, Sainsbury’s Christmas Grocery sales rose 8.6%, thanks to solid volume growth despite the inflationary pressure. This company attributed this growth to the first-ever Nectar Prices Christmas program that helped customers save an average of £16 on an £80 Christmas shopping bill. The program encouraged the company’s Nectar cardholders to save money on Christmas bills by redeeming their points.
Meanwhile, Christmas General Merchandise sales fell 3.7% year-over-year. Christmas Clothing sales also fell 6%, as customers preferred to shop for groceries over clothing items.
Meanwhile, Sainsbury’s retained its full-year Fiscal 2024 outlook. The underlying profit before tax guidance remains intact between £670 million and £700 million, mostly in line with the prior year’s figure of £690 million. Also, the retailer continues to expect retail free cash flow generation of at least £600 million. Sainsbury’s CEO Simon Roberts said that he would share further details at the Strategy Update event set for February 7.
Is J Sainsbury a Good Stock to Buy?
On TipRanks, SBRY stock has a Hold consensus rating based on two Buys, two Holds, and one Sell rating. Analysts remain concerned about the inflationary pressure in the U.K. and its impact on retailers. Even though food inflation has declined steadily, analysts prefer to sit on the sidelines until further clarity. The J Sainsbury plc share price target of 307p implies 4.7% upside potential from current levels.
