Tesco, Sainsbury’s and M&S shares suffer £3.5bn hit as price war looms
UK supermarkets Tesco, Sainsbury’s and M&S have suffered a £3.5bn hit to their shares since Friday, as fears mount of a grocery price war.
City sources has warned that a supermarket price war is looming, after Asda chairman Allan Leighton said last week that the grocer is “beginning to see incremental improvements in our price gap“.
Asda also warned of softer profits in the year ahead, as it embarks on a “substantive and well backed programme of investment in price, availability and the shopping experience” to regain customer trust.
Tesco saw the biggest hit to its share price today, down 10% by lunchtime, while Sainsbury’s was down around 8% and M&S down 7%.
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Analysts have said that in order to lower prices to compete, Tesco and Sainsbury’s profits will likely be pinched, The Guardian reported.
Last week, a source close to Asda said: “We have a substantial war chest to deliver a sustained, long-term investment in lower prices for customers.”
This came despite the supermarket having struggled to be price-competitive over the past couple of years, as it grappled with heavy debt loads.
As part of its turnaround plan, Asda made one of the first big changes to its pricing offer in January, with the re-launch of its famous Rollback price proposition. This offers an average reduction of 25% and has now been expanded to roughly a quarter of Asda’s entire range.
3 Comments. Leave new
Mr Market moves in mysterious ways. I’ll buy more Tesco shares.
Mr Market moves in mysterious ways. I’ll buy more Tesco shares.
Asda don’t have the money for an all out price war. Simple as.
Unless TDR Capital – or the last Issa standing – want to sink more onto the debt pile, which becomes a self-fulfilling prophecy … as they won’t want to own the liability and will transfer it to Asda ‘NewCo’ Holdings pretty sharpish. Asda’s debt will be *far* more expensive than Tesco, Sainsbury’s, an improving Morrisons or the opaque world of Lidl/Aldi finances.