Goldman Sachs Lifts Sainsbury's to 'Neutral' on Argos Sale

Goldman Sachs has upgraded Sainsbury's to 'neutral' from 'sell', citing the sale of Argos as a key overhang removed. The British grocer announced the sale to Swift Partners on July 31, which eliminates the primary risk behind Goldman Sachs' negative rating. The disposal aligns with Sainsbury's Next Level Strategy, focusing on food and delivering profit leverage from sales growth.

The broker had previously centered its 'sell' rating on a challenging outlook for Argos, driven by competitive pressure from Joybuy format and low UK Household Available Cashflow growth. However, the sale of Argos to Swift Partners is expected to be cash neutral, with Sainsbury's receiving at least £120 million in proceeds.

Goldman Sachs expects a neutral impact on underlying operating profit and low-single-digit underlying earnings-per-share accretion from the deal. The broker also kept its forecasts unchanged, projecting fiscal 2027 revenue of £34.97 billion and earnings per share of 23.61 pence.