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Sainsbury's downgraded ahead of trading statement

Bank of America Merrill Lynch has made a pre-emptive downgrade of Sainsbury ahead of its post-Christmas trading update on Wednesday. Shares in Britain’s third-largest grocer have been bumped to “underperform” and its price target pegged back to 350p from 430p.

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Bank of America Merrill Lynch (BAML) has made a pre-emptive downgrade of Sainsbury's (LON:SBRY) ahead of the supermarket chain's post-Christmas trading update on Wednesday.

Shares in Britain’s third-largest grocer have been bumped to “underperform” and its price target pegged back to 350p from 430p.

“We view the like-for-like guidance as more challenging given the persistently difficult market conditions and believe a valuation premium to UK peers is increasingly hard to justify,” analyst Sherri Malek said in a note to clients.

BAML also pointed to speculation that chief executive Justin King may step down “given the less robust outlook” for Sainsbury.

At 11.30am, the stock was changing hands for 364.9p, down just under 1%.

In a busy week for the retail sector, analysts have been revisiting their forecasts.

On Monday house broker Citi cut its forecast and price target for Marks & Spencer (LON:MKS), while Bernstein Research took the red pen to its earnings prediction for M&S.

Marks, which is fighting to turn around its womenswear offering, reports on Thursday, alongside Tesco (LON:TSCO), Britain’s largest retailer.

The nation’s leading shopkeepers have so far provided a mixed picture of High Street demand.

On New Year’s Eve Debenhams sounded the earnings alarm and followed this by jettisoning its finance chief.

Next (LON:NXT) appeared to positively revel in the tough conditions, while shopping centre stalwarts John Lewis and House of Fraser came through the crucial selling period in decent shape.

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