Over the first 3 months of the year the UK’s leading supermarkets staged a strong recovering rally from their distressed levels outperforming the FTSE 100 significantly.

Credit Suisse has today initiated coverage of UK food retailers with a negative stance rating both Tesco and Sainsbury’s at “Underperform” with aggressive price targets of 169p and 219p respectively – indicating the potential for a 20% collapse in Tesco’s share price and 15% pull back in Sainsbury’s taking them back to levels they were trading at 6 months ago.

Whilst Credit Suisse highlighted the continuing decline in like-for-like sales, the rate of decline in margins is even quicker as the price war continues saying “We see no obvious path back to recent margin levels”. In the note CS confirmed Tesco and Sainsburys had born the brunt of the price war.

 

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