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Asda merger deal in the spotlight as Sainsbury's braces for disappointing results

PUBLISHED: 11:38 01 July 2018 | UPDATED: 12:29 01 July 2018

Sainsburys is set to report a dip in first quarter sales this week, ahead of the supermarkets £12 billion merger with Asda.
Picture: Yui Mok/PA Wire.

Sainsburys is set to report a dip in first quarter sales this week, ahead of the supermarkets £12 billion merger with Asda. Picture: Yui Mok/PA Wire.

Sainsbury's is set to report a dip in first quarter sales this week, with boss Mike Coupe expected to be questioned on the progress of the supermarket's £12 billion merger with Asda.

The grocery giant is tipped by analysts at Barclays and Jefferies to report a 0.1% fall in like for like sales in the three months to July. It compares with a 0.9% increase in the fourth quarter.

James Grzinic, of Jefferies, said that the trading update would be “sluggish”, with soft demand for general merchandise products at Argos behind the dip.

It would confirm recent figures from Kantar showing that sales at Sainsbury’s slipped 0.2% over the past 12 weeks and its market share fell 0.4% to 15.6%.

The data was in stark contrast to rivals Asda, Tesco and Morrisons, where sales were boosted by the recent heatwave.

Lacklustre figures aside, focus is expected to fall on the Asda merger, with Mr Coupe to face further probing over the deal as analysts turn their attention to the Competition and Markets Authority investigation.

James Anstead, analyst at Barclays, said: “We have long thought that the merger of Sainsbury’s and Asda makes sense - the question is whether the competition remedies will render the proposed deal uneconomic.

“The view of the CMA will likely remain unknown until mid-2019. We are sceptical about store disposals being highly material given that both companies have taken extensive advice and are investing considerable credibility into the transaction.”

MPs have also weighed into the deal of late, subjecting Mr Coupe and Asda boss Roger Burnley to intense scrutiny over its potential impact on small suppliers.

The unified group would have combined revenues of £51 billion and boast a network of 2,800 Sainsbury’s, Asda and Argos stores, giving it unprecedented buying power.

City diary

The following events are due to take place this week:

Monday

Interims: Eve Sleep

Manufacturing PMI data released

Tuesday

Interims: St Modwen Properties

Construction PMI data released

Wednesday

Trading updates: Sainsbury’s, Topps Tiles

Services PMI data released

Thursday

Finals: Superdry

Trading updates: Associated British Food, Bovis Homes, Persimmon

Friday

AGM: Stobart

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