Sector movers: Tesco falls as rising competition hits supermarket stocks

2nd Dec 2013 14:26

Cautious broker comments and fears of rising competition in the supermarket sector sent share prices of the UK's top grocers lower on Monday morning, as retailers enter their busiest selling period of the year.Global retail chain Tesco was among the worst performers on London's FTSE 100 today after analysts at HSBC downgraded their rating on the stock from 'neutral' to 'underweight' and cut their target price for the shares from 400p to 340p.HSBC said that Tesco's current margin targets are unlikely to be maintained and that forecasts will have to be reset."We believe a 5.2% UK operating margin is not sustainable, and that aiming for any margin is the wrong strategy. In our view, a margin fall in inevitable and a margin reset is necessary. We advocate Tesco slashing its margin to 2-3%."Goldman Sachs also reiterated its 'sell' rating for Tesco on Monday after lowering its target price from 332p to 320p on the back of recent weak industry data from Kantar."We have updated our [third-quarter] estimates for weaker Kantar data and factoring tougher comparables and escalating competition in certain international markets," Goldman said.The stock was down 2.13% at 340.55p.Tesco is due to report its third-quarter results on Wednesday for the three months to November 23rd and is expected to unveil a 1.5% fall in like-for-like sales in the UK.Other listed supermarkets Morrison and Sainsbury were also trading in the red today after discount grocer Lidl announced plans to more than double the number of stores it has in the UK.Ronny Gottschlich, UK Managing Director of the German brand, said that the UK grocery market is entering a "new era" as Lidl aims to expand to 1,500 stores, up from around 600 stores currently.Rising competition from the so-called 'discounters' such as Aldi and Lidl has prompted concerns about market share at the 'Big Four' retail groups of Tesco, Sainsbury, Morrison and Asda over recent years, and this announcement will likely dampen sentiment further ahead of the key Christmas period.Top performing sectors so far todayMobile Telecommunications 5,275.71 +0.08%Bottom performing sectors so far todayForestry & Paper 10,545.16 -2.59%Food & Drug Retailers 4,468.45 -2.35%Insurance (non-life) 1,781.67 -2.03%Industrial Metals & Mining 1,320.60 -1.62%Oil Equipment, Services & Distribution 23,072.36 -1.51%BC