Deutsche cuts target price for Sainsbury’s

Deutsche Bank analysts revised their target from 650p to 600p, partly because the credit crunch has reduced the potential for the retailer to release value from its property portfolio.

The broker said: “Our 650p price target was based on a 75 per cent probability of a bid for Sainsbury’s reflecting a leveraged joint venture opco/propco structure value of 700p.

“However, the change in credit market conditions means this kind of structure is difficult to finance.”

Deutsche Bank expects Sainsbury’s to post like-for-like sales growth of 3.5 per cent – in line with UK comparable sales posted by Tesco on Tuesday and Morrisons last month. Sainsbury’s second quarter will cover the 16-week period to October 7.

Deutsche Bank said supermarket switching data suggested that shoppers jumped ship from Sainsbury’s to Asda and Tesco over the course of the summer. Two factors could be at play, it said: “First, something of a switch to more value-oriented players as consumers tightened belts and, second, the fact that Sainsbury’s is more exposed to fresh food’s trading volatility than most.”

Shore Capital analyst Clive Black said: “I would expect to see a gentle easing of Sainsbury’s like-for-like sales over the next couple of months.”

Delta Two, the Qatari-backed investment vehicle seeking to acquire Sainsbury’s, initiated negotiations with the supermarket’s pension trustees last week after the grocer opened its books for due diligence.

l By the end of next week, Sainsbury’s online shoppers will be able to specify a one-hour delivery slot for food orders. The service will be available from all but one of its 141 shops that provide the service.

The intention is that it will be available from 200 shops by March 2010. Sainsbury’s head of marketing for online, James Foord, said two more shops a week were offering delivery.

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