Citi has taken a slightly negative reading for Tesco and Sainsbury's from Morrisons' latest quarterly results, warning of the threat of intensifying competition among the big supermarkets.
Morrisons, the privately owned grocer, reported like-for-like sales up 3.2% in the 13 weeks to 26 July, a measure that strips out the effect of new store space.
That marked an acceleration from the 2.2% recorded in the previous quarter.
Price cuts raise the stakes
The bank drew five main takeaways from the company's earnings call, and several carried a cautionary note for the listed players.
Citi said Morrisons had flagged continued price investment, industry shorthand for cutting prices to draw in shoppers, which points to a possible step-up in competition across the sector.
Management also pointed to a pressured consumer backdrop and uncertainty over where food inflation goes next, though it described the convenience market as relatively buoyant.
For Tesco and Sainsbury's, both of which are listed, more aggressive pricing from a rival is rarely welcome news.
A muted industry backdrop
The read-across follows figures from research firm Worldpanel a day earlier that painted a subdued picture of the wider market.
Total till-roll sales across the industry rose just 2% in the four weeks to 6 September, lagging inflation of 2.3% over the same period.
Morrisons' own performance held up better than that, with Worldpanel putting its till-roll growth at 3.5% over a comparable stretch.
Eyes on Tesco
Attention now turns to Tesco, the UK's largest grocer, which is due to report first-half results on 8 October.
Citi has already published a preview of those numbers.
The broker's overall message is that competition among the supermarkets may be about to sharpen, just as shoppers turn more cautious and the outlook for grocery inflation grows harder to call.
