Corporate dealmaking at Sainsbury’s will come under scrutiny next week as the retailer provides shareholders with an update on its recent trading performance.
City analysts and journalists are expected to press the supermarket giant over reports that it held merger talks with rival Morrisons, alongside its agreed sale of Argos.
As the UK’s second-largest supermarket group, the company will detail its latest performance and strategic vision in a half-year update on Thursday 22 October.
Trading at Sainsbury’s has remained resilient in recent years despite broader economic uncertainty, with the firm investing in price reductions and customer loyalty to protect growth in a competitive market.
It has steadily increased its market footprint, capturing a roughly 15.3 per cent share of the UK grocery sector, according to the latest figures from Worldpanel.
But the retailer remains significantly behind largest rival Tesco, which has a 27.9 per cent share.
In 2019, Sainsbury’s sought to merge with third-largest player Asda in an effort to take on Tesco but saw the £7 billion deal blocked by competition regulators.
There has been significant speculation in the following years that Sainsbury’s could look to a takeover or merger deal again to accelerate its growth and take a more dominant position in the market.
Earlier this month, the Financial Times reported that Sainsbury’s held talks with private equity-backed rival Morrisons – currently the sixth-largest grocer – earlier this year in a fresh attempt at consolidation.
It said the firms are no longer in talks over such a move, but the reports ignited fresh speculation that Sainsbury’s could look for a takeover deal as part of its growth ambitions.
Investors will be keen to find out more about the retailer’s long-term growth strategy in its update next week.
In July, Sainsbury’s agreed to sell its Argos general merchandise business for at least £120 million to Swift Partners – a new company set up by retail experts including former Co-operative Group boss Richard Pennycook – around 10 years after buying the brand for £1.4 billion.
Analysts reacted positively to the group’s move to focus further on its core Sainsbury’s business.
The retailer is expected to unveil further growth next week, albeit with sales growth likely to slow on the back of weaker food inflation and “softer” volumes for part of the quarter.
Experts at Barclays predicted the group will report 2.6 per cent sales growth for the second quarter of the financial year, compared with 3.6 per cent in the first quarter.
They also suggested that earnings before interest and tax are likely to come in around £530 million for the half year, up 4 per cent year-on-year.
Investors will be keen for guidance on how the group’s profit outlook could be impacted by a predicted rise in inflation as the Middle East conflict continues to push energy costs higher.
Read MoreNew cheapest online food shop revealed – and it’s not Aldi or Tesco
The 59p supermarket soup voted better tasting than Heinz and M&S
