Asda's attempt to reposition itself as the UK's most competitive grocer on price has yet to deliver a meaningful advantage, according to new data from UBS, which found the struggling supermarket's prices remain broadly in line with Tesco PLC (LSE:TSCO) despite running below the industry average on inflation.
Grocery industry inflation ran at 3.7% in January on a like-for-like basis, up from December and below Kantar's measure of 4.0% and RPI of 4.5%, according to UBS's Evidence Lab, which tracks prices and promotional activity across the Big Four supermarkets and Aldi.
Asda came in with the lowest inflation of the major grocers at 2.9%, below the Big Four average of 3.8%, and UBS noted the gap has widened in recent months.
However, the bank said that when compared against Which? supermarket basket data, Asda's pricing remains broadly in line with Tesco on a small basket and is actually slightly more expensive on a large basket, undermining the narrative of a decisive price reset.
The data also showed Asda continues to lose market share, with a 90 basis point decline in the most recent 12-week Kantar period, suggesting that whatever price repositioning has taken place has not yet been enough to reverse the retailer's fortunes.
J Sainsbury PLC (LSE:SBRY) recorded the highest inflation of the group at 4.5%, while Tesco came in at 3.6%, broadly in line with Aldi at 3.5%.
UBS noted that both Aldi and Lidl continue to behave rationally, prioritising profitability over aggressive price competition, pointing to Aldi's £250 million dividend and Lidl's improving margins as evidence.
UBS said it remains positive on the UK grocery sector and reiterated Buy ratings on both Tesco and Sainsbury's.