Sainsbury's 'is in danger of being left on the shelf'.

Byline: TOM NICHOLLS

THE difference in fortunes of two of the biggest names in British food retailing could not be more marked.

Tesco seems unable to put a foot wrong and its shares continue to test fresh highs. Industry data this week suggest the sector's star performer has poached more customers from Safeway than its rivals have been able to scoop up.

Tesco, says JP Morgan, is growing at an impressive three times the industry average.

But J Sainsbury's stock is plumbing new depths. Sainsbury's - which has stumbled on a series of profit-warnings - has tried to stop the rot by slashing its dividend, axeing 750 head-office jobs and putting 3000 new staff on the shop floor.

Its determination to turn its fortunes around has elicited positive comment from brokers, but no one is under any illusions about the scale of the task it faces.

Gerrard says the firm's strategic review has been positively received by the market, but with earnings visibility "limited", the broker has retained its underperform rating and says the shares are fairly valued at 220p.

JP Morgan, also going underweight, strikes a similar note of caution. While Sainsbury's is pulling out all the stops to make sure trading over Christmas holds up, the price of failure-would be high, it warns investors. "If shoppers are confronted with empty shelves over Christmas, there is a danger they will turn away from Sainsbury for good."

Digging itself out of the hole will be no easy task for the ailing retailer, reckons Goldman Sachs.

"As the contrasting fortunes of Tesco and Sainsbury's/M&S highlight, the strong look set to become stronger and the weak weaker."

JP Morgan, like many other brokers, prefers Tesco, which it rates overweight. The US broker is neutral on Wm Morrison, whose Safeway unit racked up losses of [pounds sterling]39 million in the first half of the year and continues to shed sales at an alarming rate.

But ABN Amro is maintaining its buy recommendation, arguing that Morrison, which outperformed yesterday on the back of upbeat statements about the integration of Safeway, is undervalued relative to Tesco.

Small oil stocks, Burren Energy in particular, were bid up yesterday on rumours that an Indian company may be lining up a takeover.

With oil stock valuations swollen by energy-price strength, now is not generally considered to be the best time to be buying such assets.

However, investors increasingly believe oil prices will remain reasonably buoyant over the long term, suggesting equity valuations may also prove durable.

High oil prices, while a damper on market sentiment generally, were also behind sector strength, with Premier Oil, Paladin Resources and Tullow Oil among the risers. But BP and Shell are expected to trade sideways until next week's third-quarter earnings reports, which should reveal another highly profitable three months.

Another lacklustre perfrormance by Wall Street left the Dow nursing a fall of 21.17 points at 9865.76.

By contrast, the Nasdaq Composite of hi- tech stocks rose 20.65 to 1953.62, flushed by the big rise in profits at internet companies such as eBay, Google and Amazon.

Today in Tokyo the Nikkei 225 ended up 67.90 points at 10,857.13. Hong Kong was closed for a public holiday.