Sainsbury’s Shares Make 52 Week Lows as YTD Decline Stretches to 17%

J Sainsbury shares (LON: SBRY) are down 2.97% today, hitting fresh 52 week lows of 226p after coming under pressure that has brought the YTD decline to 17.26%. The company, a stalwart of the UK retail landscape, has also seen it's stock rating cut at Exane on the day (from Outperform to Market Perform), raising some pulses ahead of its critical full-year earnings release expected in mid-April.

From a technical standpoint, the charts offer little immediate comfort to bulls. SBRY is trading decisively below both its 50-day moving average (currently situated ~ 252p ) and its 200-day moving average (~267p). Breaching these key technical levels often signals entrenched selling pressure and suggests that reclaiming upward momentum may require a significant catalyst.

All eyes are now fixed on the forthcoming full-year results for Fiscal Year 2025, anticipated around April 17th. This announcement is poised to be a watershed moment for the company's narrative. Investors will be keenly dissecting the figures, particularly after a mixed performance in the preceding periods.

While Sainsbury's reported a modest rise in FY 2024 revenue to £32.7 billion (released April 2024), underlying earnings per share (EPS) experienced a slight contraction. More recently, the half-year results disclosed in November 2024 saw revenue of £17.37 billion slightly undershoot expectations, although EPS met consensus at 0.11 GBX. For the upcoming full-year 2025 figures, analyst forecasts centre on an EPS range of £0.12 to £0.22, setting a clear benchmark against which the actual performance will be rigorously assessed. Revenue expectations for the subsequent half-year period are pegged around £15.44 billion.

Despite the recent share price struggles, Sainsbury's continues to offer a potentially attractive dividend yield ~5.5%, based on its last total annual dividend payout of 13.10p per share. This relatively robust yield could provide a floor of support, particularly appealing to income-seeking investors in the current environment, provided earnings don't deteriorate significantly.

Intriguingly, the steep share price decline stands in contrast to the prevailing sentiment among City analysts. The consensus rating leans towards “Buy” or “Overweight,” with an average price target pinned significantly higher at approximately 300.62p. This disconnect implies that many analysts believe the current market price overly discounts Sainsbury's prospects, potentially seeing value in its market position, turnaround potential, or the strength of its underlying assets, anticipating factors not yet reflected in the bearish price trend.

🟩 The Bull Case for J Sainsbury plc (LON: SBRY)

• Attractive Dividend Yield: Offering over 5%, providing significant income potential for investors.
• Valuation Potential: Trading near 52-week lows with a moderate forward P/E (~10.3) suggests potential undervaluation if operational improvements materialize.
• Strong Analyst Backing: Consensus ratings lean positive (“Buy”/”Overweight”) with a price target implying substantial upside (~300p vs. current ~229p).
• Resilient Market Position: Holds a significant share in the defensive UK grocery sector.
• Turnaround Catalyst: Upcoming earnings could act as a positive trigger if results surpass muted expectations or management provides optimistic guidance.

🟥 The Bear Case for J Sainsbury plc (LON: SBRY)

• Negative Price Momentum: Sharp declines over 1, 3, and 12 months, with the stock testing 52-week lows.
• Bearish Technical Signals: Trading below key 50-day and 200-day moving averages indicates strong downward pressure.
• Recent Earnings Concerns: Past results showed EPS pressure and minor revenue misses, fuelling worries about profitability.
• Intense Competition: Faces margin pressure from discounters (Aldi/Lidl) and established rivals like Tesco in the cut-throat UK grocery market.
• Macroeconomic Headwinds: Cost-of-living pressures and economic uncertainty pose risks to consumer spending patterns and overall demand.

The imminent earnings report will undoubtedly be the key determinant of Sainsbury's near-term fate. A strong beat on profitability metrics, encouraging like-for-like sales figures, or positive forward guidance could spark a much-needed rally and force a re-evaluation by sceptics. Conversely, results landing at the lower end of expectations, or any indication of further margin erosion driven by intense competition from discounters and traditional rivals, could see the shares break below their recent lows and prolong the period of investor uncertainty.