Hargreaves Lansdown argues that Tesco’s (LON:TSCO) purchasing alliance with Carrefour makes sense but risks kick-starting a new supermarket price war, Citywire has reported. The comments came after the two companies unveiled a long-term partnership yesterday amid the ongoing UK supermarket price war.
Tesco’s share price closed marginally lower in the previous session, shedding 0.23 percent to close at 256.10p. The shares, however, outperformed the broader UK market, with the benchmark FTSE 100 index giving up 89.08 points to end the session 1.17 percent lower at 7,547.85.
HL weighs in on Carrefour deal
Citywire quoted Hargreaves Lansdown’s analyst Laith Khalaf as commenting on Tesco’s alliance with Carrefour which will cover the relationship with global suppliers, the joint purchasing of own brand products and goods not for resale.
“In theory, the big supermarkets can use greater firepower in the supply chains to lower prices, drive more sales, and perhaps even keep a bit more margin for themselves,” the analyst pointed out, adding, however, that there was also a risk that “a tit-for-tat price war spirals out of control, and ends up lowering profit margins across the country”.
“Challenging trading conditions have sparked a wave of reinvention in the UK supermarket sector, and this new partnership between Tesco and Carrefour is yet another stage in that process,” he said.
Other analysts on FTSE 100 grocer
The 16 analysts offering 12-month price targets for Tesco for the Financial Times have a median target of 275.00p on the shares, with a high estimate of 300.00p and a low estimate of 200.00p. As of June 29, the consensus forecast amongst 22 polled investment analysts covering the blue-chip group has it that the company will outperform the market.