Broker snap: Evolution upgrades Tesco on £500m price offensive

23rd Sep 2011 10:13

Evolution Securities has upgraded supermarket giant Tesco from sell to neutral, on the back of a £500m price repositioning which begins next week.The company released a statement on Thursday titled 'Tesco's Big Price Drop', in which it announced "immediate help for families all over the country in these tough economic times by cutting the price of thousands of essential items.""The repositioning takes effect from Monday and we will take a close look in stores then, but in principal this appears to be the right strategic move by Tesco and should help the company get on the front foot," said Evolution analyst Dave McCarthy.Some 3,000 product prices will be scaled back (including 1,000 own label), multi-buy promotions will be reduced, and the double Clubcard points promotion will end."We have always felt that double points were not valued by consumers and it was an ineffective investment by Tesco."Evolution says that the fact that The Co-Op, Waitrose, Ocado, Sainsbury and others have "priced off Tesco" in the past shows that its price position is wrong. "Tesco is a dominant market leader with significant economies of scale and should be much cheaper than the competition."The broker sets a new target price of 350p.Shares were 1.73% higher at 362.4p by 10:28 on Friday.BC