Broker snap: Tesco better bet than Sainsurys for Credit Suisse

7th Nov 2011 16:31

For anyone about to do their weekly shop, this might make interesting reading. Tesco is leading the way in the so called "price war" between the major Supermarket chains. At least that's according to Credit Suisse which is impressed by the aggressive posture of Britain's retail leviathan. Tesco, CS argues, is "committed" to what's being called the "big price drop". The programme has been running for six weeks now, which Credit Suisse suggests is unusual as Tesco's normal strategy is to run price reductions for only four weeks. The longer-than-normal duration implies a desire to bury the competition. The response from Sainsbury has been weak in CS's view. It has not price matched all the reductions being made by Tesco, especially in its own brand range. As Tesco continues to keep prices low the pressure will mount on Sainsbury to price match more of its products and so slash into its margins.Morrisons meanwhile is not tied to the same "match Tesco" price promise as Sainsburys and so will be able to defend its margins more easily. For that reason CS says Tesco and Morrisons are better bets than Sainsbury.BS