Tesco, M&S and Sainsbury’s shares drop amid wider FTSE 100 rally
The UK’s major listed supermarkets missed out on a post-crisis FTSE 100 bump this morning after Tesco’s full-year results stoked fears of ‘trolley wars’ in the sector.
The FTSE 100 index rose by more than six per cent as investors breathed a sigh of relief after Trump’s ‘reciprocal’ tariffs were paused last night.
However, Tesco, Marks and Spencer, and Sainbsury’s fell by seven per cent, three per cent, and five per cent, respectively.
The sell-off was sparked by Tesco’s full-year results. The UK’s biggest supermarket warned that its profit would be affected by “a further increase in the competitive intensity of the UK market”.
The supermarket expects group adjusted operating profit of between £2.7bn and £3bn next year, down from £3.13bn for the 2024/25 financial year.
“The seven‐month stock low [in Tesco’s share price], driven by aggressive pricing tactics from rivals like Asda and Aldi, reveals market nervousness amid ongoing pressures,” Edison Group analyst Russell Pointon said.
Earlier this year, new Asda boss Allan Leighton talked of the ‘war chest‘ Asda had to drive down prices and regain its competitive edge in the market.
It led to speculation that Asda will shake up the market with a wave of price cuts.
“Tesco and Sainsbury’s have certainly been major beneficiaries of market share from Asda over the last couple of years… While Tesco has the greater overlaps with Asda given its national presence, we think any pain from a resurgent Asda will be shared across the industry,” Jeffries analysts said.
However, analysts are sceptical that Asda has the ability to commit to the scale of cuts it has promised.
“Much of the industry’s dynamics will be determined by Asda’s ability to improve volume growth over the next three to six months. Google Trends and Kantar data show limited evidence of this to date.
“Until [evidence of volume growth] arrives, we expect sector valuations to remain pressured,” Jeffries analysts added.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown, said: “Fears of a price war that could squeeze profitability have weighed on sentiment across the sector recently, but it hasn’t materialised yet.
“Despite recent headlines, Asda doesn’t appear to have the financial firepower to disrupt this dynamic.”