TESCO is tipped to launch a price war next week, which one analyst says could put the squeeze on online deliver service Ocado under its pledge to match prices.
The retailer was said by industry sources to be trying to dent Asda’s sales, but Ocado could be hit in the crossfire.
Panmure Gordon’s Philip Dorgan is predicting that Ocado’s pledge to match prices on 7,400 Tesco products will put further pressure on the service, which has a contract with Waitrose.
In Monday’s trading statement, Ocado said that it had seen sales rise in the third quarter and that it was on track with its business plan, but urged caution.
Commenting on the impact of a prospective price war triggered by Tesco, Dorgan said: “Ocado is playing with the big boys now.
“Unfortunately, scale is a big advantage in food retailing, so we expect Tesco’s planned price initiative to hurt Ocado disproportionately. We therefore reiterate our ‘sell’ recommendation and 50p price target.”
Ocado’s shares closed down more than 11 per cent yesterday on the back of the news.