Broker snap: Tesco-Asda pricing gap widens, says Morgan Stanley

15th Jul 2013 10:24

The pricing gap between Tesco and rival supermarket Asda was the highest in two years in June, according to Morgan Stanley.The latest results of the broker's AlphaWise UK Food Retail Price Tracker show that its sample basket was 5.2% less expensive at Asda than at Tesco last month.This compared to a gap of 2.5% on average since July 2011 and a 2.5% gap in May 2013. The basket measures the prices of 527 branded stock keeping units (SKUs) year-on-year at Tesco, Sainsbury and Asda.Morgan Stanley said that the results could suggest that Asda was reacting to weak top-line numbers from recent Kantar and Nielsen industry market-share data "as the banner continues to lose customers to hard discount competitors".Meanwhile, the broker said that Asda could also be benefitting from more firepower to cut prices than the other 'Big Four' supermarkets - with operating margins at a premium to its peers - and/or management maybe more focused on driving like-for-like sales growth as opposed to trying to protect its P&L account.Morgan Stanley has kept its 'underweight' rating for UK-listed stocks Tesco and Morrison, but maintained an 'overweight' stance on Sainsbury.Tesco was trading 0.54% higher at 351.45p by 10:22 on Monday, while Sainsbury and Morrison were in the red. BC