The ASDA Threat Is Over

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Tesco Express store sign on building exterior, store frontage (Photo by Peter Dazeley/Getty). Getty Images The Tesco share price (LON:TSCO) has hit a decade high, and so has its UK market share. With previous concerns surrounding ASDA now evaporating, the question now turns to whether the shares still have upside on a fair value basis. Making a Basket Case Out of ASDA Shareholders were spooked earlier this year when key competitor ASDA unveiled its plans to launch aggressive rollbacks to its prices. This subsequently led to the Tesco share price sinking by as much as 15.3%. But those who had conviction in Britain’s largest grocer and bought its shares at the bottom would have secured a lofty gain of 34.8% in less than 4 months – outstripping both the FTSE 100 (+16.1%) and S&P 500 (+22.6%). Investors had initially feared that ASDA’s undercuts would lead to market leaders Tesco and Sainsbury’s having to lower prices to an unreasonable point in order to maintain their market shares. This would have come at the expense of their margins and profits. Tesco’s board were even spooked by the move, as they guided for a conservative EBIT range of £2.70-3.00 billion when they unveiled their FY25 results, which was reiterated in the Q1 update. Thankfully, however, ASDA’s threats have failed to materialise thus far. As a matter of fact, the results have been quite the opposite, with Tesco seeing its biggest UK market share gain this year (+0.8%), while ASDA continues to lose ground (-0.9%). Moreover, the latest Kantar data recorded Tesco sales rising a whopping 7.4% – almost double the market’s 4.0%, while ASDA’s sales remain in negative territory (-2.6%). Tesco Market Share Still Trumps Closest Peers Interpretiv So, what gives? Well, ASDA’s underwhelming rollbacks can be attributed to a couple of main…