Tesco, Britain’s largest supermarket chain, announced a profit warning last week, citing poor market conditions and increased competition from discount retailers Aldi and Lidl. Tesco subsequently cut its dividend and shares fell by more than 6%. The shares are now down more than 30% compared to prior year. Tesco is not the only supermarket suffering from the impact of price wars. Morrison’s shares have declined by more than 32% this year.
The global economic recession has taken its toll on the major UK supermarkets. The proposed sanctions against Russia, combined with poor economic growth in Europe suggest that we may well hear further profit warnings from large caps over the coming months.