Sainsbury: Q1 trading statement

4:45 p.m. Mon 26 Jun 2006

Like-for-like growth in the quarter was slightly better than last year at 5.7% (excluding petrol). The number given for the overall level of price deflation of 0.9% is for groceries only so it can not be directly compared to the latest number disclosed by Tesco. However it does appear to be broadly in line with sector trends.

The continuing margin improvements over last year together with stable growth make it likely that we will see further margin improvements this year.

Little has changed since we last looked at Sainsbury and it remains our favourite supermarket pick. At 326p it is cheaper than either Tesco or Morrison (on both its EV/EBITDA of 8.6× and its EV/sales of 0.43), together with more room for improvement than Tesco and less execution risk than Morrison.