Broker snap: JPM sees tough year for J Sainsbury
JP Morgan has lowered its target price on J Sainsbury by 20p to 350p, describing the supermarket operator's guidance for the year ahead in yesterday's full year results as 'downbeat'.
While the 2007/08 results were fully in line with expectations, the broker said, the gloomy outlook for this year prompted it to lower earnings per share estimates. "Rising operating costs and flagging leverage from sales are important drivers of the downgrade," JPM said.
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"These factors are not quantified, but energy costs look set to rise around 10% this year and the lack of sales leverage should be plain when the company only hopes for 3% to 4% like-for-like growth when helped by extensions of stores and high food inflation." JPM keeps its 'underweight' rating on J Sainsbury.
Elsewhere, Deutsche Bank downgraded the supermarket to 'sell' from 'hold' and cut its target price by 25p to 335p, also citing forecasts for the year ahead. Customer growth has stalled and like-for-like sales growth has reverted to normal levels, Deutsche Bank noted, meaning that higher costs will be more difficult to absorb.
