The Motley Fool

Will panic buying help the Sainsbury share price?

Image source: Getty Images.

It is not really a surprise that, in the midst of so much negative news, the release today of data showing that UK supermarkets have had a record month for sales seems out of touch.

Panic buying has hurt consumers (at least, the ones that didn’t manage to buy 100 toilet rolls), but it has meant an increase in sales for supermarkets. As an investor, it is with considering which supermarkets may now make good investments. I think Sainsbury (LSE: SBRY) could be one such share.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The data

Market data provider Kantar said today that overall supermarket sales were up more than 20% in March. Coronavirus-driven panic buying led to an additional £1.9bn in spending in the month. In comparison, February saw an increase in sales of 1.4%.

The data shows that frozen food saw particular increases, up 84% as people hoarded food. Alcohol sales jumped 67% after UK pubs closed their doors.

Though these statistics impact all the supermarkets, Kantar said that Sainsbury was a particular winner, seeing sales increase 22.4% over the four weeks. It attributed this mainly to the company’s strong position in London and the South East, where the coronavirus (and panic buying) has been hitting hardest.

Short-term gains or long-term benefit?

Of course this bump in sales looks likely to be short lived. It may be enough to impact a company’s quarterly results, and perhaps even the full-year numbers, for the better, but it isn’t a fundamental shift in consumer demand.

Despite this, I think Sainsbury is in a particularly strong position to benefit going forward. Talk now suggests the lockdown could go on for six months or more, meaning online shopping for essentials will be the new norm. Sainsbury has always had a good online presence in terms of high street supermarkets and is in prime position to take advantage.

In addition, there will be a large number of Sainsbury customers who previously did their shopping in stores, who are now forced to move online. It is only natural they will stick with the brand they know. Tesco is likely to see a similar benefit of course, but Sainsbury’s strong delivery platform offers it an advantage.

Investment case

With this in mind, there are a few other aspect to consider for Sainsbury. First, the market is panicking. In times of panic, strong companies get oversold. While many businesses will struggle through this scare and lockdown, supermarkets selling essentials will not.

The second point worth considering is its dividend – at the current price Sainsbury shares are yielding a nice 5.3%. Again, unlike many companies that will be forced to cut pack expenditure, supermarkets are set to benefit from the lower costs of staff in store and the extra revenue of online sales.

This trend moving online has been seen for some time of course, but with lockdown set to continue, I think Sainsbury is perfectly placed to benefit.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Karl has shares in J Sainsbury. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.