Sainsbury’s to post falling sales but eyes fixed on merger

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Sainsbury’s is expected to post falling sales amid its quarterly results later this week but focus remains on the upcoming merger.

For the three months to July analysts at Barclays and Jefferies predict Sainsbury’s is poised to post a like-for-like sale dip of 0.1 per cent, compared to a 0.9 per cent jump in the previous quarter, thanks to meager demand for Argos’ general merchandise.

This would place the UK’s second largest supermarket behind its Big 4 rivals who have enjoyed rising sales thanks to the warm weather.

However, the main focus of its release will fall on the upcoming £12 billion merger between Sainsbury’s and Asda, and the progress made by the Competition and Markets Authority’s (CMA) probe into the deal, which is set to determine whether it would be allowed to go ahead.

“We have long thought that the merger of Sainsbury’s and Asda makes sense – the question is whether the competition remedies will render the proposed deal uneconomic,” Barclays analyst James Anstead said.

“The view of the CMA will likely remain unknown until mid-2019. We are sceptical about store disposals being highly material given that both companies have taken extensive advice and are investing considerable credibility into the transaction.”

The merger of the country’s second and third largest supermarkets would topple Tesco’s longstanding reign as the UK’s biggest grocer my market share.

Sainsbury’s-Asda’s revenues would also be £51 billion thanks to network of 2800 Sainsbury’s, Asda, Habitat, Argos and George stores.

When it was first announced at the end of April, chief executive Mike Coupe said the merger would lead to £500 million in cost savings and further investment to lower prices by around 10 per cent on everyday items.

This figure has now been fiercely challenged by MPs, with the Environment, Food and Rural Affairs Committee chairman Neil Parish calling the figures a “nursery rhyme” adding that the deal would reduce consumer choice and “extract more pain” from smaller suppliers.

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