FTSE 100 Analysis: Sainsbury’s delivers sales beat – Top UK stocks

FTSE 100 falls

The FTSE 100 is down 0.1% this morning.

The economic calendar is quiet today, with liquidity likely to suffer considering US markets are closed for the July 4 holiday.

FTSE 100 analysis: Where next for the UK 100?

The UK 100, which tracks the FTSE 100, continues to follow the falling trendline lower. This has now been in play for over two months, making it a key trend to watch.

If the trendline proves too difficult to break then we could see the index drift back toward the 7,454 floor that has held firm over the past three months. Any break below here would risk the index falling back toward the 2023-lows we saw back in March.

On the upside, a sustained break above the trendline could open the door to a return toward 7,650.

Top UK stock news

Sainsbury’s is down 1.4% this morning. The second largest supermarket chain in the UK revealed retail sales excluding fuel rose 9.2% year-on-year in the 16 weeks to June 24, with like-for-likes excluding fuel up 9.8%. That was ahead of estimates provided Barclays, Citigroup and UBS. Its core grocery business drove the growth after rising 11%. Importantly, grocery sales rose thanks to higher volumes and not just the inflationary pressure on prices. That was complimented by a 4% rise in general merchandise sales, although clothing remained weak, with sales down 3.7%. The supermarket said ‘inflation is starting to fall’ and that it is passing on savings to customers. It said prices on its top 100 selling products are lower now than they were in March whilst prices have continued to rise in the broader market as it continues to invest in lower prices, allowing the supermarket to gain market share. That is vital considering Sainsbury’s has lost almost 1% of its market share since the start of 2020, mostly to discounters Aldi and Lidl, according to data from Kantar Worldpanel. Sainsbury’s reiterated its full year outlook, which may have left some hoping for an upgrade disappointed.

That update comes as the government announces UK supermarkets and fuel station operators will be forced to publish live prices under a new scheme designed to stop them overcharging customers. Research shows customers have been paying an extra 6p per litre for fuel at supermarkets over the past year. A new fuel monitor oversight body will be scrutinising prices going forward. That may bring Tesco and Sainsbury’s onto the radar today. Tesco is down 0.1% this morning.

Energy suppliers have been warned by regulator Ofgem that they must hold on to more cash and assets to reduce the risk of them going bust and minimise the cost of disruption and risk of failure. The open letter was sent out to the industry after the energy price cap came back into play after the end of the government’s guarantee scheme this month. It warned it expects suppliers to meet their capital requirements before considering dishing out dividends. Keep an eye on the likes of SSE and Centrica, which are both up 0.3% today.

Notably, JPMorgan has placed both Centrica and Drax Group on catalyst watch as it forecast both will report strong growth in earnings and cashflow when they release earnings on July 27. Both are listed as top picks for UK utility stocks. Drax Group is up 0.7% in early trade.

Wizz Air is down 0.2% after it said it carried over 5.3 million passengers at a load factor of 92.2% in June. That marks an improvement from the 4.3 million passengers at a load factor of 86.1% seen the year before as the recovery from the pandemic continues. Capacity in the month climbed to 5.8 million seats from just over 5.0 million a year earlier.

OSB Group is flat at £4.88 after it purchased 313,850 of its own stock yesterday as part of its share buyback programme launched back in March, all of which are being cancelled. The price paid for each share varied between a low of £4.84 and a high of £4.912. The specialist mortgage lender now has 420.7 million shares in issues following the repurchases.

PZ Cussons is down 0.7% ahead of a capital markets event today to discuss the progress being made at Childs Farm, its baby and child personal care business that it acquired back in March 2022. The firm will discuss the growth opportunities ahead, with the firm confident it can treble the size of the business by expanding in both the UK and internationally over the next five years. ‘As a brand, Childs Farm is highly complementary to our strategic focus on the Baby category, an attractive and growing market, and worth £3.5 billion in retail sales across our priority markets alone. Our success today in growing Childs Farm reflects our winning formula for brand building, a key part of our wider strategy as we continue to transform the business,’ said chief financial officer Sarah Pollard.

Haleon is down 0.2% amid news it is considering divesting from some of its smoking cessation products as it looks to get rid of non-core businesses, according to unnamed sources speaking to Bloomberg. The group of companies in question, which own the likes of Centrum, Tums and Advil, could be worth some £800 million, the report said.

Coats Group is up 1% after agreeing to sell its European Zips business for around $1 million to a German firm named Aequita. The unit booked revenue of around $50 million in 2022 but it boasted margins well below the average seen at its other divisions. The transaction should close in the third quarter. The divestment is part of its plan to streamline the business and cut costs.

WAG Payment Solutions is up 2.3% after exercising its call option to buy an additional 18% stake in German payments firm JITpay for around EUR25.7 million. It bought its original 9.99% stake for EUR14.3 million last year. That will provide capital for JITpay to expand while providing more services to the London-listed company’s platform. Importantly, WAG Payment Solution’s subsidiary has the right to buy the remaining 72% of the company from 2025 onwards.

Troubled Cineworld is considering appointing Eduardo Acuna, who runs Mexican cinema chain Cinepolis, as its new CEO as it prepares to emerge from bankruptcy proceedings, according to Sky News.

Informa has had its target price raised to 850p from 720p by Citi, which said estimates are ‘materially too low’ ahead of its first half results on July 27. Citi’s earnings estimates for 2023 are about 2% above consensus. Informa is up 0.5% at 731.4p.

Dunelm has been downgraded to Underperform by RBC, which also cut its target price to 1,000p from 1,300p. That is the only negative rating the homeware retailer has. RBC warned Dunelm will find it harder to grow thanks to the cost-of-living crisis and challenging housing market. Dunelm is down 4.9% at 1,065p this morning.

Housebuilder Persimmon has been downgraded to Neutral by JPMorgan as it warned its hopes that volumes would recover in 2024 are vulnerable. It has a target price of 1,090p on the stock. Persimmon is down 1.8% today at 1,010.72p.

AstraZeneca has been downgraded to Hold by Deutsche Bank, which cut its target price to 11,000p from 13,000p on the pharmaceutical giant. AstraZeneca is down 0.5% in early trade at 10,326p.