Sainsbury’s toasts stellar Christmas and B&M gives New Year present to shareholders

“Equity markets have not been derailed by the violence on Capitol Hill yesterday, with small gains being recorded across parts of Europe and Asia. Yesterday’s trading session in the US saw gains being pared back slightly as the drama unfolded, but the main indices still ended the day ahead of where they started,” says Russ Mould, Investment Director at AJ Bell.

“With the Democrats now set to control Congress when Joe Biden officially becomes President in a few weeks’ time, the market is now recalibrating the scenario where the future leader has a greater chance of pushing through his policies and thus what the consequences would be on asset classes, economic growth, monetary policy and so on. Previously the market seemed to be content with a situation of government gridlock.

“The FTSE 100 initially advanced 0.7% in early trading, but after an hour it was flat at 6,835.

“Oil producers and miners were once again strong spots on the market. A Biden administration is seen as positive for commodity prices as he should have more global trade-friendly policies compared to Donald Trump. Expectations for a weaker dollar also mean dollar-denominated commodities would be less expensive in other currencies, thus increasing demand.

“The prospects of greater spending on infrastructure projects in the US also plays well to the commodities space and to construction companies, with FTSE 100 member CRH jumping another 2%.

“These gains were offset by banks giving up some of yesterday’s gains with HSBC falling 2% and Natwest down 1.6%.

“In overseas markets, Germany’s DAX index advanced by 0.6%, while Japan’s Nikkei 225 index traded 1.6% higher. Pre-market indicative prices suggest that the US will open higher on Thursday, with the main indices showing a potential 0.5% gain.”

Sainsbury's

“While many people won’t look back fondly on Christmas 2020, for one business it proved to be a truly memorable experience. Sainsbury’s achieved knockout sales across both food and its general merchandise, with the shift in the market backdrop playing to its strengths.

“The restrictions for many parts of the country on visiting friends and family meant that a lot more people had to fend for themselves rather than sharing a big meal. That dynamic may well have resulted in a greater number of smaller-sized items being sold.

“A strong reputation for providing decent premium-range items also worked in favour with good sales of Taste the Difference products, showing that the supermarket game isn’t always about having the cheapest possible price.

“Being stuck at home without big family gatherings didn’t stop households celebrating and so champagne sales popped, and steaks were the flavour of the day for New Year’s Eve as people had to entertain themselves indoors.

“With a lot of high street shops closed in the run-up to Christmas, and many people reluctant to venture to busy places in the preceding months, it’s no wonder that Sainsbury’s-owned Argos had a field day. This was very much a digital Christmas, where companies excelled if they had the ability to offer a wide range of products online and get to them to homes quickly. Argos ticked all the right boxes.

“After years of struggling and trying to work out ways to accelerate growth, Sainsbury’s finally looks like it has moved up a gear. New chief executive Simon Roberts is off to a great start, although there still remains numerous pressures on the business, such as being able to satisfy ferocious demand for online delivery slots, dealing with supply chain disruptions, and never taking the eye off the grocery competition.”

B&M

“Value retailer B&M has been a winner during the Covid-19 pandemic whether restrictions have been relatively tighter or looser, and that’s reflected in a big increase in festive sales and the promise of a special dividend for shareholders. This is a rare income good news story for investors.

“Able to stay open through lockdown due to its focus on essential lines such as homewares, food and DIY products, it will be interesting to see if the new, stricter measures in the UK interrupt its momentum.

“On the one hand the discounted goods it offers will be welcomed by increasingly hard-pressed shoppers who are suffering financially in lockdown but on the other hand, unlike the major supermarkets, it doesn’t have an online channel to speak of.

“A reduction in footfall amid stricter stay at home messaging and the fear created by the new more infectious Covid variant could put a dent in sales given B&M doesn’t sell fresh produce and is therefore not somewhere most people could do their entire weekly shop.

“However, during the pandemic B&M won market share and its spacious out-of-town stores in retail parks are likely to continue to appeal to shoppers.

“The company has mastered the key art of retail – giving people what they want at the right price and at the right time in the right locations.

“This should stand it in good stead as we exit the coronavirus crisis, particularly as its keen prices will appeal in an economy ravaged by the events of the last year.”

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