Sector movers: Supermarkets recover after Morrison-inspired sell-off

14th Mar 2014 14:40

Food and drug retailers were the best performing stocks on Friday as sentiment in the sector recovered after a sell-off the previous session.WM Morrison dropped 12% on Thursday after the supermarket missed profit forecasts with its guidance for this year as it announced a major £1bn investment programme over the next three years (£300m this year).The investment, aimed at cutting prices in store, improving marketing and promotional campaigns and launching a loyalty card, is being taken in response to the rising competition from discount grocery chains such as Aldi and Lidl.With fears of WM Morrison beginning a price war between the so-called 'Big Four' and the lower-priced discounters, shares of Tesco and J Sainsbury were sold off sharply yesterday, falling 8% and 5%, respectively.However, Morrison, Tesco and Sainsbury bounced slightly today.Analyst Pradeep Pratti from Citigroup said that WM Morrison's actions mark the "beginning of a new era" for the UK grocery industry."The long-awaited profit reset in the UK grocery sector looks like it has finally begun. Yesterday's decision by Morrison to invest £300m in prices will, we think, hasten the adjustment in the overall UK sector profitability. We think this is a bold move by Morrisons, and believe it heralds a new era in UK food retailing," Pratti said.Top performing sectors so far todayFood & Drug Retailers 3,973.58 +0.92%Chemicals 10,416.10 +0.28%Beverages 13,193.39 +0.27%Aerospace and Defence 4,648.24 +0.26%Tobacco 36,612.29 +0.19%Bottom performing sectors so far todayFixed Line Telecommunications 4,481.31 -2.24%Industrial Metals & Mining 792.59 -1.75%Financial Services 7,719.19 -1.62%Life Insurance 7,130.43 -1.60%Mobile Telecommunications 4,945.54 -1.44%BC