Sainsbury’s bucks the trend as shares rise 3% despite FTSE 100 drop

[MongiIG]

First half (H1) earnings at Sainsbury’s show that it is possible to cut costs and still deliver an upside surprise for investors. The supermarket’s numbers show that it is gaining market share from rivals.

 Jeremy Naylor | Writer, London | Publication date: Thursday 03 November 2022

Sainsbury's shares up

Share of supermarket chain Sainsbury's are on the rise today, bucking the overall market trend.

The company reported first half (H1) earnings. Boss Simon Roberts says he has great sympathy with his customers as we all have to contend with higher interest rates and so higher prices, and big strains on household budgets.

So let's take a look at the numbers. The company saw profits slump 8% in the latest six months as the cost of living pressures offset slightly improved revenues.

But if you look at the like-for-like sales, excluding fuel, down 0.8%, the company says it will invest more than £500 million by March 2023 and is keeping prices lower by cutting costs at a faster rate than its competitors, meaning that they have more firepower to battle inflation.

But of course they are up against some really big firepower as well, with the likes of Lidl and Aldi and all the other major supermarket chains, all trying to vie for the same ground.

Share price chart

Let's take a look at what Sainsbury's share price has done because it really has been an impressive lift in its shares.

The stock, after an hour and a quarter worth of trade this morning, is up 2.8% off the highs. But just trading at this wavy blue line here, which is the 100 period moving average, but we're in levels pretty much not seen since the middle of September this year.

So it was an impressive number coming out this morning and it has been appreciated by traders who have bid the stock up.

And of course, you've got to bear in mind the fact that the FTSE 100 is down today because of the word from the Fed last night and Bank of England (BoE) is raising interest rates as well today, up by an expected 75 basis points to 3%. So that's going be another headwind for these companies.

But they are seemingly coping well in trying to engage with customers with lower prices, but they're cutting costs at the same time. And it's this that I think ultimately could well end up showing through in full year profit numbers.

We'll have to see how things go, but at the moment at least Sainsbury's stock is up by around about 3%.