Sainsbury's and National Express

Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

“Markets continue to go through a one step forward, one step back motion. The FTSE 100 failed to match the excitement seen with England’s World Cup win last night, slipping 0.3% to 7,569 in morning trading on Wednesday. Asian markets were also looking gloomy with Hong Kong and Tokyo both in the red,” says Russ Mould, investment director at AJ Bell.

Sainsbury's

“The fact that Sainsbury’s has only managed 0.2% like-for-like sales growth in the last 16 weeks would suggest the business is swimming in treacle.

“Customers want cheaper goods which mean supermarkets across the board are slashing prices in order to stay competitive. That clearly comes at a cost.

“Sainsbury’s continues to lose market share, hence why it is cosying up to Asda to try and create the UK’s largest supermarket group.

“While its grocery arm is clearly struggling, Sainsbury’s is managing to keep its head above water with general merchandise and clothing, helped by the acquisition of Argos.

“The company continues to shift some Argos stores into Sainsbury’s sites in order to capture the interest of customers doing their food shopping. It has also added its Tu clothing range to Argos’ website which cross fertilises its brands.

“Yet these initiatives may not be enough to overcome the fact that the core grocery business is in a sticky patch and we’re still a long way off from discovering whether the competition authorities will allow Sainsbury’s to link up with Asda.”

National Express

“A €1bn contract to provide bus services in Morocco initially sounds like a major development for transport operator National Express.

“But look closer and it is clear that the business isn’t suddenly going to come into a big sum of money.

“The €1bn contract runs over 15 years – or in other words €66.7m a year. While still not an inconsiderable sum, you have to bear in mind this amount is revenue and not profit.

“As National Express and several of its peers have demonstrated in the past, there are no guarantees on how profitable transport contracts will be.

“More positively the award represents a continuation of the strategy of growing international revenue which now accounts for around three quarters of the group total.”

These articles are for information purposes only and are not a personal recommendation or advice.