Sainsbury's shares close up after positive analyst report

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Leading UK Supermarkets Compete For Their Share Of The Market In The Run Up To Christmas
Source: Getty

Shares in supermarket Sainsbury's closed up 3.25 per cent today after an analyst report rated it as a top pick in the groceries industry.

Analysts at Berenberg said the retailer's lagging like-for-like sales growth was due to "transitory factors", and that it was due for a "performance reversal over the coming months".

They also praised the integration of Argos, which they expected to underpin 25 per cent underlying earnings growth in the next three years.

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In a report on the whole food retail market, Berenberg contradicted the view that inflation is bad for business, arguing that it will drive competition in the sector.

It was a good day across the board for listed companies in the sector, with Morrisons, Tesco and Ocado all closing up.

Berenberg said Ocado was the structural winner for online grocery delivery, but said it would face fresh competition from Amazon's own efforts within the same area.

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Analysts also pointed to a wave of mergers and acquisitions in the industry as the big players look out for more growth opportunities.

"Management teams understand the slow growth and structural pressures in the supermarket segment and we believe they will be looking for sources of growth elsewhere. The wholesale market is the imminent target with the Tesco/Booker deal, and Morrison’s expansion in the channel. Beyond that, the options are open: vertical integration, ecommerce acquisitions, franchised expansion, self-cannibalising expansion in the discount channel, and roll-out of new banners, among others."

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