Broker Sees Chance for Sainsbury’s to Advance
Thursday, June 11, 2009 19:08
After its recent upbeat annual results many investors in J Sainsbury believe that the supermarket chain’s revival plan is pretty much complete. However, Morgan Stanley believes there is a way to go yet.
The American investment bank says that while Sainsbury’s has adressed its operational issues, it is still burdened by two legacy problems: the fact that it sells about 15% less per square foot than its rivals and that it has underexploited its property assets.
However, the broker thinks these problems now offer an opportunity. Sainsbury’s has sold less per square foot as consumers think it is more expensive than its rivals. Its management, though, thinks this perception is changing and Morgan Stanley believes this will translate into premium like-for-like sales growth for about the next 12 months. It is also believed that Sainsbury’s can add at least 5% of new space per day for the foreseeable future by adding 4 million sq ft to existing stores and expanding into areas of the country where it is under-represented.
Morgan Stanley has upgraded its forecasts by 5% and its rating on the stock to “overweight”, with a price target of 375p. the shares rose 5.5p to 322p.
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