Hello and welcome to Company Focus. My name is Aamer Nawid. I'm a Research Analyst at Fat Prophets and this week I'm going to be taking a look at retailers J Sainsbury and Tesco.

Regular viewers will be aware that it wasn't long ago that I was talking about how both Tesco and Sainsbury were looking to implement new initiatives to capture the frugal consumer brought about by the recession here in the UK.

Well evidently, they've both done very, very well. They've managed to stave off the challenge of serial discounters. But out of the two, which one has had the upper hand?

Well from a share price perspective, the year so far belongs to Sainsbury's out of the two, but only marginally.

As you can see from the chart here, Sainsbury's in black, Tesco in red and the market overall the FTSE 100 in blue, both have performed for the market crucially which is encouraging and Sainsbury's outperformance, how much of it is actually down to positive developments or the fact that Tesco rallied in 2009 a lot harder (a period before this chart shows) is unclear.

Comparing the two in terms of sales, a bit of a mixed bag. Tesco sales were up by 7 per cent, Sainsbury's 5 per cent, so Tesco's has the edge. But when you compare like-for-like, Sainsbury's has the upper hand - 4.3 per cent versus 2.6 per cent.

Profit before tax, again, positives for both sides here, but again Sainsbury's I think probably nicks it. Tesco's £3.4bn before tax is obviously a huge amount and it's an increase of 10 per cent which again is significant. But Sainsbury's is £610m, it may be smaller but it was a 17.5 per cent growth on the year before.

So I think the key is both have developed well and done very, very well in such very challenging conditions and as far as UK market share goes, again, both have kind of done very, very well. Tesco's has gone from 30.3 per cent to 30.5. That's for the 12 weeks to April 18th, the latest data available. Sainsbury's again, 16.2 per cent to 16.4, both registering a 0.2 per cent growth there.

Both businesses have evolved to the point where they both offer completely different things to the investors. I mean since Tesco overtook Sainsbury's in the '90s, its focus, well it has just simply raced ahead. Now its focus is on international expansion. In China, for example, the plan is to open 80 stores by 2016. If that does materialise, Tesco would have created more floor space in China in five years than it had done in eight decades here in the UK. So given the expansion over there in the East and the fact that it's one of the largest retailers in the world, it's probably better to compare Tesco to, say, Germany's Metro, France's Carrefour and Wal-Mart as this chart here demonstrates. Tesco is signified here in pink, so it's holding its own with the others in terms of share price performance since 2009.

Sainsbury's is expanding as well but just in the UK and on a smaller scale whereas Tesco is moving ahead in China, Sainsbury's is looking to expand in the North of England. The company has also focused on non-food store expansion as well as growing its number of convenience stores and its online growth.

As far as the shares go in terms of valuation, it seems that investors are prepared to pay a little bit more for Sainsbury's shares than they are for Tesco. This can be down to numerous different reasons. Firstly, Tesco has exposure to the euro of which Sainsbury's has none and that's obviously fraught with danger at the moment.

In addition to that, as of March 20th, Sainsbury's property portfolio was valued at £10bn. That's £2.3bn higher than it was sort of last year.

Now, Qatar Holdings have recently purchased Harrods as we know and they hold 26 per cent of Sainsbury's shares. So the boost in property portfolio could potentially trigger another approach, a fresh approach from the sovereign wealth fund.

Another factor why investors are prepared to pay a little bit more could be the fact that there is simply a better dividend yield there.

I think what recent market volatility does tell us always, the fact that companies with resilient earnings able to pay a decent dividend, should form the cornerstone of any portfolio and both companies deliver on this front. Both have basically shown form under tough conditions. Both are industry champions and despite the fact that low food price inflation and a potential VAT increase in the UK could provide headwinds, I think that both have enough in a locker to actually continue to post earnings growth and sales growth and in that case, share price outperformance will gradually tick on up during 2010 and beyond that also.

Thanks for watching. Make sure you tune in again next week.