Sainsbury share price plummeted to the lowest level since November 9 2020 as concerns about the UK economy continued. SBRY stock crashed to a low of 200p, which was about 42% from the highest level in 2021. This decline means that its market cap has crashed to over 4.7 billion pounds. Other UK retail stocks like Tesco and Marks and Spencer have also crashed.
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UK inflation concerns
Sainsbury is a leading British supermarket chain that was started in 1869. It has over 600 supermarkets and 800 convenience stores mostly in the UK. As a result, the company is the second-biggest retailer in the country after Tesco.
Sainsbury’s, like other British retailers is operating under intense pressure. First, the British pound has crashed to the lowest level since 2020. As a leading importer, this means that the company is now paying more money for its imports.
Second, Sainsbury is suffering as the cost of doing business jumps. The latest data by the Office of National Statistics (ONS) showed that the UK inflation jumped to 9% in July. Now, analysts at Citi expect that inflation will hit 18.3% in January while those at Goldman Sachs believe that prices will soar to 22%.
Therefore, Sainsbury will likely see thinner margins and lower sales. Indeed, the most recent results showed that the company’s sales dropped by 2.4% in the second quarter. Therefore, there is a likelihood that it will miss its profit guidance of between 630m and 690m pounds.
Sainsbury share price forecast
The daily chart shows that the SBRY share price has been in a strong bearish trend in the past few weeks. Recently, the stock found a strong support at 201p, which was the lowest point on June 30th. It has moved below the 25-day and 50-day moving averages. The shares also managed to cross the key support at 201 this week.
Therefore, the shares will likely continue falling, with the next main support to watch being at 180p. A move above the resistance level at 210p will invalidate the bearish view.