Sainsbury's takes a profit hit - here's how analysts reacted

 
Helen Cahill
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The supermarket's like-for-like sales fell (Source: Getty)

Sainsbury's share price is suffering today after the supermarket posted a drop in profit of more than eight per cent in its full-year results.

The supermarket said that Argos had boosted sales, but many analysts were worried that it has lost sight of its core mission - selling food. At time of writing, Sainsbury's share price was down two per cent at 274p.

Read more: Sainsbury's profit slides eight per cent

Analysts at Shore Capital said they had approached Sainsbury's results "with a sense of apprehension".

"Our apprehension has proved correct as the business makes less relative progress than has been the case in recent years against an improved competitor set, so now losing market share," they said.

"The group may be going well in clothing and general merchandise but within the core food element of the supermarket estate it is struggling to build sales. Whilst this is so, Argos is going well for Sainsbury's, which is very pleasing indeed, whilst the bank, which is in a reasonably aggressive lending phase, reported a small beat to our forecasts."

ETX Capital's Neil Wilson said Sainsbury's full years were "not a great set of numbers", and that the most concerning aspect of the supermarket's performance was its 0.6 per cent drop in like-for-like sales.

Read more: Supermarket sweep: what to expect from Sainsbury's and Morrisons this week

"Investors will hope this slowdown will morph into sales growth but the outlook is challenging," Wilson said.

"Sainsbury’s sales are declining and it is losing market share. That’s a reflection of the performance of key rivals - Sainsbury’s did very well when Tesco was on its knees but is now facing its own challenges. In particular, as Tesco grows sales again it’s coming at the expense of Sainsbury’s."

Sainsbury's has been boosting its supermarket offer with leisure options such as sushi bars, but Phil Dorrell, partner at consultancy Retail Remedy, said the grocer should be focusing on its core sales to make sure its long-term share value is convincing for investors.

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