Supermarkets Seen Facing ‘Price War’

Supermarket stocks plunged along with the rest of the market yesterday after an analyst issued a report downgrading Kroger and Safeway and speculating that a difficult price war among food retailers was likely to damage profitability this year.

NEW YORK — Supermarket stocks plunged along with the rest of the market yesterday after an analyst issued a report downgrading Kroger and Safeway and speculating that a difficult price war among food retailers was likely to damage profitability this year.

Deborah Weinswig of Citigroup Global Markets here said aggressive pricing by regional operators, and a possible new price initiative by Wal-Mart Stores — fueled by expanded private-label offerings — could force a “modern day price war.”

In addition, she noted, retailers have begun lowering shelf prices before their vendors cut their prices. “Retailers are promoting in anticipation of lower future costs, but ahead of vendor support, in order to gain market share,” she wrote.

The stocks of Kroger, Safeway, Supervalu and A&P all fell in the range of 6%-8% yesterday, and the S&P 500 dropped nearly 5%. The market appeared to be dragged down by the revised, $1 trillion bank bailout program unveiled yesterday, reports said.

Read More of Today's Headlines [3]