Report
Alexander Korda
EUR 439.90 For Business Accounts Only

Sainsbury's is Ripe for Activism

After the failed merger with Asda Stores Ltd (ASDA), J Sainsbury Plc (SBRY LN) is in the middle of losing market share to discounters like Aldi and Lidl and simultaneously losing out to more premium brands like Tesco Plc (TSCO LN) and ASDA. To counter this, SBRY announced a restructuring plan in September 2019. We've examined this plan and identified other areas SBRY can improve to regain its market share and become a competitor in the space again, particularly with the help of an activist.

What's Interesting? The Edge Ingredients...
The restructuring plan J Sainsbury Plc (SBRY) put forth in September 2019 will strategically axe 15 supermarkets and 40 convenience stores and open 10 new supermarkets and 110 convenience outlets elsewhere. Additionally, it will also shut down 70 Argos stores and relocate a further 80 into its supermarkets. As a result, SBRY is planning to cut cost by around £500m in the next 5 years and reduce its debt to £750m in the next 3 years from £1.6bn. Other factors explored in our analysis (attached above) on how SBRY can reverse its current slide include: Underperformance relative to peers and the index; Currently undervalued compared to peers; Tepid growth reflected in store count; Declining market share; and TSCO example of turnaround.
Underlying
J Sainsbury PLC

J Sainsbury is principally engaged in food, general merchandise and clothing retailing and financial services. Co. is organized into four operating segments: Retail (Food), which provides a range of food, including organic produce; Retail (General Merchandise and Clothing), which provides a range of products across home, clothing, technology and leisure; Financial Services (Sainsbury's Bank plc and Argos Financial Services entities), which provides products such as credit cards, insurance, travel money and personal loans; and Property Investment (The British Land Company PLC and Land Securities Group PLC joint ventures). At Mar 11 2017, Co. had 605 supermarkets and 806 convenience stores.

Provider
The Edge Group LLC
The Edge Group LLC

The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.

The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.

 

 

Analysts
Alexander Korda

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