The grocer has made no comment, but Shore believes if an appropriate offer did come along, the group’s board would give it serious consideration as it would give chief executive Simon Roberts more freedom to focus on the development of the food offer and completion of the re-engineering of Argos.
It also makes strategic sense to exit the UK financial services market where it is a clearly sub-scale bank.
More significantly, Sainsbury, like Tesco, is looking to the future as a cash compounder, in the view of Shore.
“Growth will continue to be explored, of course, but in conservative and contiguous manners firmly embracing the digital space in the case of ‘JS’, which alongside modest EBITDA margin accretion and negative working capital, should provide the basis to deliver management’s aspired GBP500m+ of free cash flow from FY23.”
Sainsbury is next likely to update the market on progress and prospects at its interim results on the 4 November, adds the broker.
A ‘buy’ at 311p, says the broker. Shares today were down 1.9% at 304p.