From www.cityam.com – Tesco have been downgraded to underweight by J.P. Morgan. The supermarket is expected to underpeform due to structural changes in the UK food industry which may have a particularly damaging effect on Tesco.
“In our view, pricing architecture is an industry problem, but is of most concern to Tesco because its prices and ranges are margin driven”
Discount retail stores such as Aldi are changing the “price/range architecture” of the sector. Value ranges in Tesco products have become largely redundant as rivals Aldi and Lidl are not only keeping their discount price but improved the quality of their products.
J.P. Morgan concludes that Tesco should look to examples from abroad to deal with the challenges of the changing market.
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