Tesco Overtakes Sainsbury in Stock Market Valuation; MARKET REPORT
tooher, Patrick, The Independent (London, England)
It was a momentous day in the food retailing sector as Tesco finally replaced arch-rival J Sainsbury as the nation's biggest supermarket by stock market valuation. Tesco, already the leader in terms of market share, is also set to overtake Sainsbury as the country's most profitable superstore
At 313p, down 2p on the day, Tesco's market capitalisation of pounds 6.8bn is now pounds 12m more than Sainsbury, whose shares hit their lowest level since April 1994 after a large institutional investor, said to be SBC Warburg, offloaded 30 million shares via a placing at 347p.
Sentiment was also depressed by sell advice and reduced estimates from two leading brokers. Paul Smiddy at Credit Lyonnais cut his pre-tax forecast for the year to March 1997 from pounds 767m to pounds 718m. He believes that even after the downgrade the rating of 14 times earnings is still too demanding as it clings to the outmoded concept of Sainsbury being the market leader with the strongest brand. He reckons interims due at the end of the month will be "appalling" with profits down 12 per cent at the pre-tax level. NatWest cut its forecast from pounds 750m to pounds 725m for this year and now looks for pounds 794m (previously pounds 828m) for fiscal 1998. It sees no evidence of a credible marketing strategy emerging to differentiate Sainsbury from its rivals, while like-for-like sales growth is nearer 3 per cent than the industry average of 5.5 per cent. Worse than expected inflation figures and weak bond markets pushed the FTSE 100 28.1 points lower at one stage, but the index recovered after a mid-morning rally on Wall Street to end 14.6 adrift at 3994.7. Volumes of over 900 million were boosted by placings in Sainsbury and TI, the engineering group. TI dipped as low as 549.5p before rallying to close a net 8p off at 556.5p in turnover of 98 million shares after German automotive and telecoms giant Mannesmann sold its 8.86 per cent stake for pounds 224m. The 42.1 million shares were placed in the market by UBS, Cazenove and SBC Warburg at 532p. Endorsed by Princess Diana and Edina and Patsy in the sitcom Absolutely Fabulous, Harvey Nichols has always been the height of fashion among Islington ladies who lunch. Now the famous …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Tesco Overtakes Sainsbury in Stock Market Valuation; MARKET REPORT. Contributors: tooher, Patrick - Author. Newspaper title: The Independent (London, England). Publication date: October 11, 1996. Page number: 23. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.