Asda set to rock the sector with price cuts blitz
HSBC analyst David McCarthy said: “We believe there are signs that Asda may be about to fundamentally reposition on price, bringing down sector profits.
“Asda has been the UK’s most profitable retailer and has the firepower to hurt industry profitability, forcing capacity out.”
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Hide AdHSBC said that due to increased risk and uncertainty, it was downgrading Tesco from “buy” to “hold” and Morrisons from “hold” to “reduce”. HSBC is keeping Sainsbury’s at “reduce”.
Mr McCarthy said: “The chief executive of Wal-Mart stated recently that Asda will prioritise sales over margin.
“We believe this suggests Asda may be preparing a major price repositioning. If Asda does reposition fundamentally, then it could seriously damage sector profitability.
“Asda has learnt if it prioritises margins, it will lose its sales, which then leads to a falling margin. Better a company invests its margin to reward its customers and to protect its sales than to see margins eroded by the competition.”
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Hide AdThe prospect of further price cuts comes as Asda was declared the cheapest grocer out of the big four by consumer magazine Which?
A spokesman for Which? said: “Asda was the cheapest supermarket for June in our monthly price comparison, comfortably ahead of its rivals.
“We compared the price of 78 branded products in Asda, Morrisons, Ocado, Sainsbury’s, Tesco and Waitrose for the whole month of June.
“Asda was the least expensive at £156.44 while in the priciest of the six they cost £173.95.”
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Hide AdAsda has confirmed that Sean Clarke, a former Asda director, is to take over as its new CEO on July 11.
Last month Leeds-based Asda said that its current CEO Andy Clarke had decided the timing was right to step aside from his role with the company.
Parent company Wal-Mart said that with more than 20 years at Asda, and the last six as CEO, Andy Clarke has been a key contributor to Wal-Mart’s success in the UK, which it described as one of the world’s most competitive retail markets.
Andy Clarke, who is no relation to Sean Clarke, will remain with the business until the end of July, at which point he will serve as an advisor for the remainder of 2016.
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Hide AdSean Clarke is currently head of Wal-Mart’s Chinese opera-tions.
Wal-Mart, the world’s biggest retailer, confirmed that Dewsbury-born Roger Burnley will be named deputy CEO and chief operating officer at Asda when he rejoins the business in Octo- ber.
Wal-Mart said in a statement: “Roger will be a strong support to Sean Clarke having held a variety of senior leadership positions across commercial and operational functions of UK retail businesses.
“He worked at Asda between 1996 and 2002 and was part of the core team responsible for integrating Asda into Wal-Mart following its acquisition in 1999.”
Asda announced another big slide in sales in May as shoppers continue to decamp to discounters Aldi and Lidl.
Like-for-like sales fell 5.7 per cent in the 13 weeks to March 30.