Merrill men say 'sell Sainsbury' line

THE Merrill Lynch analysts alleged to have received an 'inside briefing' by Sainsbury have resumed their coverage of the supermarkets chain and have urged investors to sell the stock.

In a research report published yesterday analysts Andrew Fowler and John Kershaw reiterated their bearish view of Sainsbury on the same day as publishing a ' buy' note on rival Tesco.

Merrill Lynch is house broker to Tesco. Fowler reckoned, correctly, that Tesco's third-quarter sales update today would show that the retail giant is still powering ahead.

Sainsbury fell 4¼p to 263¼p as Fowler poured cold water on the prospect of a takeover bid.

He reckons chief executive Justin King has injected 'a greater air of realism' but still believes it is 'inevitable' that profits will fall again in 2005/06.

Merrill sees King's strategy as 'one of stabilising his patient, not one that will lead to a miraculous recovery'.