12 April 2017 by lberuti
There was a time when news of a price war among UK retailers would have put pressure on their credit risk premia. Even if today’s commitment by TSCOLN ( Tesco Plc ) to keep prices low is not price war per se, it will certainly ratchet up the pressure on an industry that already faces shrinking profitability, as sterling’s decline pushes up the cost of imported products. TSCO’s CEO said that “there is inflationary pressure there, but we try and offset everything we possibly can by working with our supplier base”, confirming that life will not get any easier for UK retailers. TSCO’s stance means that pressure on margins across the industry is nowhere near abating, especially when one takes into account the relentless growth of discounters Aldi and Lidl. While equity investors took stock of the situation and marked UK retailers’ lower - making them the worst performing group of the FTSE -, it is impossible to discern them on the above grapple where colour indicates the direction and magnitude of the move – the bigger the move, the brighter the colour; red means wider risk premium; green means tighter premium -. They were as bland as all the other names.