London, Oct 3 - J Sainsbury Plc, Britain's third-biggest supermarket group, is expected to report a 3.9 percent rise in second-quarter underlying sales on Wednesday, a pick up from the first quarter, but lagging rivals.
Investors will be looking for signs of how the group, which is associated with both higher prices and higher quality than many of its competitors, plans to tackle a deteriorating trading environment and increased competition.
Britain's shoppers are curbing spending amid higher food and fuel costs, diving house prices and rising economic uncertainty.
Data from researchers TNS WorldPanel suggests Sainsbury has lost a little market share in recent months to rivals more associated with cheaper prices, such as Wal-Mart Stores Inc's Asda, Wm Morrison Supermarkets Plc and discounters Aldi and Lidl.
Sainsbury, which runs over 800 supermarkets and convenience stores, is fighting to retain cash-strapped customers and also to attract them from upmarket rivals such as Marks & Spencer Plc and Waitrose, part of John Lewis.
It is running campaigns such as "Feed Your Family For a Fiver" and "Switch to Save," which highlight the difference in price between its own-brand products and branded goods.
However, the competitive landscape got tougher two weeks ago when market leader Tesco Plc launched a low-cost range of goods under the banner "Britain's Biggest Discounter."
CONSUMER ENVIRONMENT
The 3.9 percent average forecast rise for Sainsbury's like-for-like sales excluding fuel in the 16 weeks to Oct. 4 is up from the 3.4 percent rise reported in the first quarter, and will be helped by high food price inflation, store extensions and an easier comparative figure from the second quarter last year.
Estimates ranged from 2.75 percent to 4.7 percent in a Reuters poll of nine analysts.
On Tuesday, Tesco posted a 4 percent rise in like-for-like sales excluding fuel for its latest trading period, while Morrison reported an 8.2 percent increase last month.
Differences in the timing and length of the trading periods mean that none of the figures is directly comparable.
"Although we expect Sainsbury's Q2 sales performance to be robust, we think that the current consumer environment is moving against the company," Credit Suisse analysts said in a note.
RBS analysts, however, think the company is not being given enough credit for recent improvements in its pricing and that it has a higher proportion than rivals of older and smaller household shoppers who are more resilient to a downturn.
Sainsbury's shares have underperformed the DJ Stoxx European Retail Index by 18 percent over the past year, but trade at 16.1 times forecast earnings, above Morrison on 15.4 and Tesco on 14.3.
The stock is underpinned by speculation of a takeover bid, with the Qatar Investment Authority, which dropped plans for a 600-pence-a-share offer last November, still owning a 27 percent stake.
Of 24 analysts polled by Reuters Estimates, only one has a "buy" rating on Sainsbury's shares. Nine have a "hold," eight an "underperform" and six a "sell."
The average forecast for full-year profit before tax and one-off items is 528 million pounds ($933 million), up from 488 million the year before.