J Sainsbury (LSE: SBRY)'s first-quarter sales beat Tesco's (LSE: TSCO) efforts.
It seems such a short time ago that the UK's FTSE 100 (UKX) supermarkets, Tesco (LSE: TSCO), J Sainsbury (LSE: SBRY) and Morrisons (LSE: MRW) were considered safe investments for troubled times.
But then we had Tesco's well-publicised disappointment in its pre-Christmas trading, though the resulting fall in the share price was enough for ace investor Warren Buffett to top up his holdings -- you can read about it in the free Motley Fool report "The One UK Share Warren Buffett Loves".
Then came a first-quarter trading statement this week that showed a further fall in like-for-like sales, which disappointed the market.
Sainsbury vs Tesco
And today it was time for Sainsbury to release its quarterly figures -- and it outshone Tesco.
Like-for-like sales for the 12 weeks to 9 June rose by 1.4%, with total sales, excluding fuel, coming in 3.8% higher than the same period last year. That was apparently boosted by Jubilee spending, with an estimated two million extra visits made to stock up on party cakes and flags.
Tesco's quarter ended too soon to include the holiday shopping, so we do need to take that into account when comparing the two. But on the other side, apparently the poor April weather will have had a negative effect on Sainsbury's sales.
Why the fall?
Though the company described its performance as "good sales performance in a challenging market", the punters weren't overjoyed, and the share price is down 11p, or 3.8%, as I write.
On the current price of 280p, that suggests a price-to-earnings ratio for the full year of just over 9, and a dividend yield of 6%, which makes the shares seem crazily cheap to me. So why are they falling?
Presumably, the fall is due to like-for-like sales coming in a little behind City guesswork, and that might cause a downrating of full-year forecasts. But it surely won't be by much, and although the dividend wasn't mentioned in today's release, it should be well covered, and I don't see much likelihood of its not hitting expectations.
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Ignore the noise
To me, analysts' machinations over day-to-day effects on shopping footfall and basis-point minutiae are a nonsense, and they are trying to rate things to a far greater degree of precision than the real world actually permits. Still, it keeps them in a job, and long-term investors can ignore the noise and concentrate on the all-important long term fundamentals.
And those fundamentals are saying to me that the supermarket sector is undervalued and should provide nice returns over the next decade -- dividend yields of this level from supermarkets don't come along that often in a lifetime.
Where is the UK's leading dividend stock-picker investing today? The identities of Neil Woodford's favourite blue chips are revealed in this free Motley Fool report -- "8 Shares Held By Britain's Super Investor".
Further investment opportunities:
> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Tesco.
