Sainsburys(LSE: SBRY) posted a fifth straight quarter of declining underlying sales this morning, and warnedthat it did not expect trading to improve any time soon.
For the10 weeks to March 14, the final quarter of the groups financial year, sales at stores open at least a year fell 1.9%. This figure was worse than the sales decline of 1.7% reported for the third quarter.
City analysts were expecting Sainsburys to report a fourth-quarter sales decline of 2%, so the company beat expectations for the period. Sainsburys itself had predicted a fourth-quarter sales decline of 2.4%.
But despite that fact that the company beat expectations, management warned today that Sainsburys expects the market to remain challenging for the foreseeable future. Food deflation andcompetitive pressures on price all taking their toll on the companys sales.
Nevertheless, after spending 150m slashing the prices on more than 1,100 items since November,Sainsburys now believes that its price position relative to our major competitors has never been stronger. And the figures support this statement.
During the companys fourthquarter,sales of items thathad been reduced in price rose by 3%. Additionally,convenience store sales rose by 14% during the period whilegeneral merchandise and clothing sales grew by 6%.
So, while Sainsburys headline figures are nothing to get excited about, the group is still making solid progress in many areas.
Sainsburys fourth-quarter trading figures may have surpassed expectations but the company is not out of the woods just yet. Headwinds remain in the form of the discounters, Aldi and Lidl, both of which continue to report rapidly expanding sales.
Still, data from KantarWorldpanel, the consumer research group, showsthat in the past month Sainsburys performance has been improving. Indeed, Kantars data indicated thatin the four weeks to March 1, Sainsburys sales only declined by 0.6%, the second best performance of the big four supermarkets.Tescocame in first place with sales growth of 0.1% reported.
However, these figures have been skewed somewhat by an earlyMothering Sunday, which has pulled sales forward.
Time to buy?
Todays results from Sainsburys seem to have impressed the market, but now is not the time to buy in my opinion.
Sainsburys still has a long road ahead of it and as the supermarket price war intensifies, the company could find itself struggling to compete with larger, more aggressive peers.
On the other hand, Sainsburys low valuation make the companys shares look attractive at present levels. The company is currently trading at a forward P/E of 10.3 and City analysts expect the company to offer a dividend yield of 4.9% this year.
But therapid growth for Sainsbury’s are now over and investors shouldn’t expect fireworks from thecompany any time soon. However, if you are looking for an exciting investment, our analysts have recently identified a stock that could drive a three-fold increase in sales in just five years.
Here at theMotley Fool,we’re always on the lookoutfor the markets best hiddengems and business visionaries. To that end, our team of top analysts has put together thisFREEreport,”3 Hidden Factors Behind This Daring E-commerce Play“.
This issomethingyou do not want to miss and we’re offering you the chance to find out more for free right now — justclick here.
Do NOT buy these stocks
Theres lots of opportunity out there in todays market but theres also PLENTY of danger.
In anticipation of Champion Shares PROs brief opening to new membership a few short weeks from now, the analyst team behind the Motley Fools most exclusive service has agreed to share 3 stocks they believe YOU would do best to avoid.
PRO research is rarely made available to the general public. To find out the names of these “don’t buy” companies — and to claim your 100% FREE copy of Steer Clear Stocks right away — simply click here.