Citigroup’s equity research team (NYSE: C) commented on the groceries industry on Friday and re-iterated its “sell” rating on Safeway (NYSE: SWY) and its “buy” rating on Wal-Mart (NYSE: WMT).
The analysts said that Wal-Mart is getting aggressive on its pricing and will likely continue its “modern day price war” throughout the rest of the year.
Citi said that a competitive pricing environment along with weak consumer spending for non-discretionary items may lead to weak pricing power for the industry.
“As a result, we expect continued pressure on topline sales and margins in 2010, and would expect pressure on the stocks as the expected return to a normalized sales and EPS environment does not materialize,” wrote the analyst.
