It was a tale of two supermarkets today, as investors piled into cheap'n'cheerful Wm Morrison but checked out ofJ Sainsbury after its figures.
First, Sainsbury. The company unveiled half year profits up 27% and a property joint venture with Land Securities, but despite this its shares fell 2% to 417.25p.
The figures themselves were okay, showing good growth despite the recent distraction of the failed bid from Qatar-backed Delta Two.
As an aside, the company made a point of patting itself on the back for its online delivery service, and saying it planned to increase capacity in areas of high demand. It needs to, judging by recent performances. After severe wobbles last year it looked like it was getting back to being a reasonable service. But recently it has suffered a relapse, with Sainsbury seemingly incapable of delivering on time, giving promised refunds, and this week suffering computer faults which led to a mass cancellation of orders. Let's hope this is just a blip.
Back with the share fall, analysts said the company was under pressure as investors who had been backing a bid bailed out, while there was little incentive for those with a longer term view to buy the shares just yet.
Panmure Gordon's Philip Dorgan cut his price target from 500p to 475p. He said: "We continue to find Tesco more attractive (Buy, price target 525p), with the newsflow
from the early days of its US launch highly encouraging. More importantly, it is a global growth story and this should lead to multiple expansion."
Meanwhile Morrison's shares added 3.5p to 280p. Yesterday's figures from TNS Worldpanel - which showed Morrison's market share climbing from 10.9% to 11.1% last month - was partly responsible. Lehman Brothers also issued a positive note, with an overweight rating and 360p price target. The bank said: "Following the withdrawal of Delta 2's offer for Sainsbury, the weakness in the Morrison share price provides an ideal opportunity to re-examine the story, in our view. Our conclusion is that the current share price represents a strong investment opportunity on fundamentals, valuation and Morrison's future growth propsects."
