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Though Sainsbury Tries Harder, the Competition is Just Too Much - sell

By Malcolm Stacey | Tuesday 11 July 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Peggers. The latest set of figures from J Sainsbury (SBRY) show that sales in the last four months improved by 2.3%. Which is not too bad, considering the huge challenge from the competition these days.

This pressures comes not just from the cheaper end of the grocery market, Aldi and Lidl, but from Tesco (TSCO) and Morrison (MRW), too. Tesco’s share price is, oh so slowly recovering and Morrison whose stores are becoming more light and airy than they used to be.

Sainsbury and Argos are now one. Argos is becoming as popular as I remember it used to be, before the novelty started wearing off.

But as 75 Argos shops have popped up within Sainsbury supermarkets, there is now less space to sell groceries. And it’s likely to be essential food which will win out over luxury goods, as wages fail to rise as fast as inflation.

Through Argos, Sainsbury now offers a hugely useful click and collect service which it extends to other businesses. I notice, for example, that a lot of Ebay sales can be delivered this way. 

But a headwind for Sainsbury is the rising cost of food. Not so much because it’s getting scarcer among a ballooning world population, but because of the low value of the pound.

I did some shopping in both Tescos and Morrisons the other day. I normally shop only at Aldi and Lidl. And I was rather set back by the size of my bill compared to the foreign competitors. This suggests that the similar store of Sainsbury may also struggle in the supermarket price wars.

I don’t think the future looks over promising for Sainsbury shares, even though the Argos click and collect service is super useful for an impatient British public that, these days, demands everything now.

The prospective yield is is ok, I suppose at 4%, but you can do better. And the relentless competition from competitors urges me to sell my holding.

And now the Punter’s Return beckons.

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