Sainsbury's said it will spend whatever it takes to remain competitive with Tesco, raising the possibility of a more intense price battle should the market leader step up discounting in an effort to revive sales.
“We’ve set ourselves up to make sure we’ve got the cash resources to be able to deal with whatever comes our way,” Chief Executive Officer Mike Coupe said at a press conference today after Sainsbury announced 150 million pounds ($239 million) of price cuts over the next year.
Sainsbury’s immediate earnings outlook is dependent on the scale of anticipated price cuts by Tesco, Shore Capital analysts said in a note today. Tesco’s new CEO Dave Lewis said last month that the grocer needs to consider price “very carefully” as he seeks to revive the grocer’s falling sales. Both Tesco and Sainsbury have seen business suffer as budget chains Aldi and Lidl have grabbed a larger slice of the market.
“We’re very aware that the market dynamics can change,” Coupe said in response to a question about Tesco potentially cutting its prices more aggressively.
Sainsbury in September dropped Tesco from its Brand Match price comparison program, saying that it would only match against Wal-Mart Stores Inc.’s Asda chain on branded items. At the same time, it lowered prices on thousands of food lines.
“Concerns remain that Sainsbury’s will be first in the firing line when the sleeping giant Tesco reawakens,” said Bryan Roberts, an analyst at Kantar Retail in London.
Bloomberg edited by ESM
