Tesco (TSCO) CEO Dave Lewis may have only made brief mention of the possibility of Tesco creating an upmarket convenience store offering, but the City quickly took it as a threat to Marks & Spencer (MKS) and Ocado’s (OCDO) new partnership.

At Tesco’s capital markets day on Tuesday, Lewis noted that the Finest brand gave Tesco a “very high percentage of more upmarket customers”, adding: “The opportunity to curate that range and bring new things in a more convenient outlet is something that we have tested, is something we’re interested in.”

Investors responded by sending Marks & Spencer back 4.6% to 212.1p and Ocado down 5.6% to 1,087p on Wednesday amid fears a dedicated Tesco Finest retail offering could eat into the market share of their forthcoming UK partnership.

The deal for M&S to buy a 50% of Ocado’s retail business for £750m will create a JV more reliant on customer demand for M&S branded grocery products, while a Tesco move into upmarket physical retail would pose a threat to M&S’s 700-strong Simply Food concept.

Barclays noted the rollout of Tesco Finest stores was a potential concern for M&S in particular, but suggested the market may be overreacting. “While this could be an interesting idea, [Tesco’s presentation] acknowledges that this is purely an illustrative concept and it does not seem likely to be launched any time soon.”

Tesco’s shares reacted positively, rising by 3.7% on Tuesday to 235.5p before dipping back to 235p on Wednesday.

Analysts stressed that the news around Finest was a distraction from the wider story. 

“This wasn’t about any particular project (e.g. the Tesco Finest store that the press obsesses about), but about a vast array of detailed opportunities,” Bernstein said.

Shore Capital commented: “There is a quiet data-driven revolution underway at Tesco; where a management team post-recovery is focusing upon pulling a myriad of levers to engineer ‘significant opportunities for long-term sustainable competitive growth’ through a focus on customers, costs and cash.”

Elsewhere, Just Eat (JE) fell 3.7% to 614.6p after it was downgraded by UBS to ‘neutral’ from ‘buy’ on Wednesday, with the broker concerned “JE is not investing enough at a time when capital is flowing into the industry and customer acquisition costs are rising”.

UBS said its own calculations suggested Just Eat’s 2019 UK order growth would be just 9% – well below company guidance of low to mid-teens – while the company’s earnings would be hit by its need to invest more to contain market share losses.

“Signs of improved execution and a margin reset with a new CEO would be important factors for us to turn more constructive on the name,” the broker said.