Today, I am looking at British supermarket giant J Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US), and deciding whether to add it to my own stocks portfolio’s ‘bagging area’.
Checkout stunning sales growth
The latest trade data from research house Nielsen confirmed Sainsbury’s rising popularity with the UK’s grocery shoppers. While mid-tier rivals such as Tesco and Wm. Morrison continue to lose share to budget competitors like Aldi and Lidl, Sainsbury’s emphasis on providing quality goods at affordable prices continues to reap dividends.
The supermarket is now joint second in terms of market share alongside Asda compared with third place in 2012 — Sainsbury held 15.8% of total UK sales in the 12 weeks to July 22, according to Nielsen. And sales rose 5.2% during the period versus the corresponding period last year. Sainsbury still lags behind Tesco, which holds 28.8% market share, but the gap has narrowed considerably in recent times.
Tills set to keep on ringing
Sainsbury’s most recent trading statement showed total sales (excluding fuel) advance 3.3% in the three months to 8 June. Particularly encouraging was news that like-for-like sales rose 0.8% during the period, the 34th successive quarter of growth.
In particular, Sainsbury is reporting excellent growth in its convenience store and online business divisions — sales in these areas were up 20% and 16% respectively in the first quarter from the same point in 2012. Unlike its major rivals, the retailer is yet to reach saturation point in terms of new store openings, while ongoing store refurbishments are also helping to drive revenues.
Earnings expected to continue growing
City brokers expect earnings per share to rise 6% in both this year and next, to 31.8p and 33.8p respectively. Sainsbury currently trades on a forward P/E ratio of 12.4, above readouts of 10.3 for Tesco and 10.7 for Morrisons. But unlike its two rivals, whose turnaround stories are still to gain meaningful traction, Sainsbury has excellent momentum behind it.
Meanwhile a forecast dividend yield of 4.4% sweetens the investment case in my opinion, far above the 3.3% prospective average for the FTSE 100.
A stunning supermarket selection
Shares in Sainsbury have printed strong gains since the start of the year in oft-turbulent trading conditions, and has clocked up a near-13% gain since late June alone. Indeed, the supermarket is currently trading just off its highest since May 2008 around 400p.
So while I consider Sainsbury an excellent choice for the savvy stock picker, legendary investment guru Warren Buffett has picked out another retail giant ready to turbocharge returns from your hard-invested cash.
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> Royston does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares in Tesco and has recommended shares in Morrisons.