Asda risks destabilising UK margins with its latest tranche of highly aggressive short-term promotions, analysts have warned.
The cuts, launched as part of Asda’s latest £40m Rollback campaign, follow the publication of TNS switching data revealing Asda had failed to make any real headway against Tesco in recent weeks.
CAI Cheuvreux analyst Mike Dennis said: “Asda has seen falling net margins and its current management are increasingly frustrated on how to gain market share against Tesco.”
The price cuts, offering up to 50% off in some cases, were far deeper than typical Rollback reductions (5-10%) and were “specifically targeted” on Tesco’s buy-one-get-one-free offers and three for two deals, he added.
Tesco has also raised prices on lines that Asda has de-listed in recent range reviews, which has allowed Tesco to subsidise its price cuts elsewhere, he claimed. Baird analyst Paul Smiddy added: “Asda has been taking market share off Safeway. But that source will dry up pretty soon. So it has to square itself against what Tesco is doing. An Asda spokeswoman said: “If the products we’ve rolled back are the same [as those promoted by Tesco], it’s coincidental.”