Sainsbury's poor performance could spell trouble for sector

Nick Raynor, investment adviser at The Share Centre explains why a poor trading statement from Sainsbury's makes the supermarket a ‘HOLD' for investors.

"The supermarket's trading statement reveals disappointing results. Sainsbury's announced lower than expected sales figures during the fourth quarter following a widely-predicted slowdown in the months following the Christmas rush.  The like-for-like sales (excluding fuel) including VAT, rose 1% in the 10 weeks to 19 March compared with 3.6% in the third quarter.

"Whilst overall sales figures are lower than expected, fuel sales have been a main driver in increasing its like-for-like sales in this area by 4.2%, giving a full-year increase of 4.7%. 

"What is more important however is the impact this has had on the retail sector as a whole. Early morning trading saw Sainsbury's share price fall 5% and Tesco's fell 4% in sympathy. As analysts review the sector, investors may wish to take advantage of price weakness. In the long term we see attractiveness in the supermarkets- especially Tesco."