J Sainsbury shares gain after numbers but analysts remain cautious

Shares in Sainsbury advanced in morning deals after a mixed response to sales growth at the supermarket group, but most believe the main driver for the shares will be speculation about its property portfolio.

Shares were up 2.4p, or 0.74%, to 326.8p after the group said like for like sales were up 1.1% excluding sales - slightly higher than at rival Tesco yesterday.

Chief executive Justin King said: 'We've delivered another good performance ahead of the market on top of strong growth last year.'

He said contribution from new selling space increased reflecting strong performance from new stores

But analysts were less upbeat about the group's performance.

Dave McCarthy analyst at Evolution said sales growth at Sainsbury performed ahead of Tesco but lagged Morrison on a comparable basis.

'The industry slowdown is apparent across the board and we remain cautious on the outlook. We are disappointed that like Tesco, Sainsbury has not given an ex-VAT number. Companies do not run their business by looking at inc VAT numbers,' he said.

Others pointed out that Sainsbury had included extra days in its numbers to include some World Cup-related sales.

Many agreed that speculation - and not the underlying sales story - will continue to be the main driver of shares in the months ahead.

McCarthy said: 'Sainsbury price is driven by prospect of corporate activity rather than by fundamentals. Market speculation can drive short term spikes, making it dangerous to be short.'

On a fundamental basis he remains cautious given the state of the industry.

Nick Bubb, analyst at Arden Partners, said shares are already trading at a premium to its peers.