Why Sainsburys will outperform all other FTSE 100 retailers

Tesco and Morrisons may have fired the first shots in a new supermarket price war, but fund managers are backing Sainsburys to beat the rest of the FTSE 100 retailers.

by Rachel Savage
Last Updated: 18 Mar 2014

Billions of pounds may have been wiped off the value of Britain’s big supermarkets last week, after Morrisons committed £1bn to slashing prices to compete with discounters Aldi and Lidl following results that were as unappetising as a cheap loaf of sliced white.

However, the prospect of margins tighter than a pair of maternity jeans hasn’t stopped 200 fund managers naming Sainsburys as the FTSE 100 retailer they think will perform most strongly this year. That is despite the fact that the supermarket is expected to report its first quarterly sales decline in almost ten years this week.

Justin King, winner of MT’s coveted Britain’s Most Admired Leader gong last year, who is also speaking at MT Live in June, was also named the most effective chief exec in the survey by spread betters Capital Spreads for the Telegraph, despite the fact that he’s stepping down in July (i.e. leaving on a high).

The supermarket beat fellow grocers Tesco and Morrisons in the survey, with 27% of the vote, but also clothes retailers including Next, Marks & Spencer and Sports Direct.

However, not all investors were quite so bullish. ‘Tesco, the market leader, recently abandoned its margin target and committed £200m to reducing prices. With the lowest margins in the sector, Sainsbury’s would be hit particularly hard if forced to follow,’ Chris White, head of equities at Premier Asset Management, told the Telegraph.

‘The best CEOs have a knack of getting out at the right time. Tesco’s Sir Terry Leahy and Manchester United’s Sir Alex Ferguson are both perfect examples. Justin King might just be another.’

Sainsburys’ sales over the last ten years

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