A sector-wide sell-off of supermarket stocks dragged the FTSE 100 into the red as Morrisons (LON:MRW) warned it would wage a price war on rivals after slumping to a hefty loss.
The Bradford-based chain unveiled drastic plans, including spending £1bn cutting price, to bolster its market position.
The group slumped to a loss of £176mln, forcing it to invest heavily in dropping prices to offset the onslaught from the discount grocers, Aldi and Lidl.
Turnover fell 2% to £17.7bn in the year to 2 February, with like-for-like sales 2.8% lower. Underlying profits fell by 13% to £785mln but one-off writedowns of £903mln pushed the grocer into a loss.
It also lowered its forecasts for profits for this year to £325mln-£375mln.
Broker Panmure Gordon described Morrisons’ profit forecast this year as “truly awful” and half its previous expectations.
“I'm confident that Morrisons will emerge from this period of necessary change as a more focused, more distinctive value leader and well positioned to compete sustainably in the new grocery landscape,” said chief executive Dalton Philips.
Investors weren’t convinced, dragging the shares price down as much as 10% to 210p.
News of a pricing war also saw hammered shares in its larger rivals. Tesco (LON:TSCO) tumbled 4.6% to 299p, while Sainsbury’s (LON:SBRY) suffered a 7% fall at 309p, making the supermarket groups the biggest three fallers on the FTSE 100, which fell 0.2% to 6,607.
Marks & Spencer (LON:MKS), whose food business has overshadowed the larger clothing division in recent years, also fell 2% to 464p.
Toby Morris, Senior Sales Trader at CMC Markets, said Morrisons’ share price plunge could trigger speculation about a possible bid.
“Rumours were rife in February about a private equity buyout backed by the founding family, and if they did indeed have any intentions to bid, a sharp move lower may signal an opportunity,” he said.
Scandal magnet G4S (LON:GFS) heaped more misery on the blue chip index as the City was in no mood for forgiveness.
Brokers issued a wave of ‘sell’ notes, including from Goldman Sachs, which said the Olympics and prisoner tagging fiascos have dented the potential earnings power of the business, as well as voicing concerns about the balance sheet.
The shares fell 2.6% to 226p.
On the mid-cap index, Home Retail Group (LON:HOME) rose 6.2% to 218p after the owner of Argos and Homebase nudged up its profit expectations following strong Christmas sales.
Bwin.party (LON:BPTY) rose 4% to 127p after lifting its dividend despite seeing profits slide 19%.
The online betting group made some upbeat comments ahead of the World Cup this summer, predicting a return to growth.
Shares in Gulf Keystone Petroleum (LON:GKP) tanked as much as 30% in early deals after a third party assessment of its reserves and resources in the Kurdistan region of Iraq disappointed.
The competent person’s report (CPR), prepared by ERC Equipoise, is a key component in the planned move up onto the LSE’s official list from AIM, the company said.
It confirms just under 300mln barrels of proved and probable (2P) reserves, as well as about 920mln barrels of contingent (2C) resources. All of the reserves and the bulk of the contingent resources are identified in the Shaikan and Sheik Adi fields.
The shares recovered some of their value later in the morning to trade 15% lower at 122.8p.
That is nearly half the value of the company when it won a lengthy litigation battle with Excalibur Ventures in September.
Elsewhere on AIM, Nigerian oil group Eland Oil & Gas (LON:ELA) rose 5.5% to 124p on the news it is set to benefit from a significant reduction in tax rates.
Eland’s 45% owned joint venture company, Elcrest Exploration and Production, has been in talks with the relevant government departments in Nigeria about its tax status and it says good progress has been made.
Premier African Minerals (LON:PREM) jumped 9% to 0.82p after it uncovered high grades of tungsten and new mineralisation at its RHA project in Zimbabwe.
Broker VSA described the latest information as "highly encouraging".
Other junior climbers included Equatorial Palm Oil (LON:PAL), up 57% to above 10p, embattled pawnbroker Albemarle & Bond (LON:ABM), up 25% at 8p, and New Zealand oil explorer Kea Petroleum (LON:KEA), up 35% at 3.1p.