The hurling today by Wm Morrison of “the ultimate bomb” in the ongoing supermarket price war left rivals J Sainsbury and Tesco reeling, according to analysts.
Struggling Morrisons has pledged to cut prices on 1200 of its products by up to 60% in an attempt to win back customers. Up to 40% of reductions will be on own-brand products, such as bacon and butter.
Supermarkets are losing ground to discounters such as Aldi and Lidl, and Tesco has already pledged £200 million towards lowering prices. But Bernstein’s retail analyst Bruno Monteyne called the depth and breadth of Morrisons’ cuts “a big departure”.
Monteyne, a former Tesco executive, said: “By including branded products, Morrisons wants to take customers back from Asda, Tesco and Sainsbury’s, not just the discounters.” Monteyne thinks the move will force rivals to slash prices further and likened Morrisons’ cuts to “dropping the ultimate bomb”. Jefferies’ titled its note on price reductions, “Bazooka, RPG [rocket-propelled grenade] and mortar”.
The strategy saw Morrisons fall 0.7p to 200.2p, and Tesco drop 5.1p to 287.77p. Sainsbury’s, which has yet to announce any cuts, was one of the day’s worst performers, off 9.5p at 326.25p.
Updates from the likes of BSkyB, up 31p at 911.5p, and BG Group, 36p better at 1233.75p, helped the Footsie to hang onto gains, up 24.63 points at 6804.66, despite disappointing figures from the US overnight. GDP growth in the first quarter slowed far more than expected because of cold weather.
Artificial-hip maker Smith & Nephew disappointed analysts after revealing growth slowed to 1% in the past three months. The weakness fuels speculation that the business, off 4.5p at 914.5p, could be a future bid target, with a slew of M&A activity in the medical sector.
FTSE 250 insurer Phoenix Group jumped 10p to 694.5p after an upbeat trading statement and solid first-quarter cash generation. Chief executive Clive Bannister said the company has not yet been contacted by the FCA as part of its probe into old pension plans, but said Phoenix “looks forward to engaging” with the review and is confident “our initiatives demonstrate best practice in this area”.
Salamander Energy is being wooed by potential suitors. The small-cap oil and gas explorer catapulted 10.5p to 145.12p on news that it was approached by potential buyers after putting the “for sale” sign out for two of its fields in Thailand and Indonesia. Talks are ongoing.
