Tesco, Asda Lose Market Share in U.K. as Discounters Gain

Tesco Plc (TSCO) and Wal-Mart Stores Inc. (WMT)’s Asda, the U.K.’s two largest grocers, saw their share of the market decline in the last three months as discounters gained customers seeking to reduce their shopping bills.

Tesco’s share of the U.K. grocery market fell to 30.5 percent in the 12 weeks ended Aug. 7 from 30.8 percent a year earlier, according to Kantar Worldpanel data released today. Asda’s share declined to 16.7 percent from 16.9 percent, while discounters Aldi and Lidl both took a larger slice of spending.

Tesco and Asda have a higher proportion of non-food sales than rivals, leaving them vulnerable to a reduction in non- discretionary spending. Both retailers have cut fuel prices and offered price-matching offers on branded goods as shoppers seek to combat inflation, which Kantar says has reached 5.2 percent.

“This is a challenging market for the big four grocers, which have to appeal to a broad range of consumers, unlike the discount and premium niche players,” Edward Garner, director at Kantar Worldpanel, said in a statement. Shoppers are “seeking out lower priced outlets and cheaper alternative products.”

Tesco and Asda also trailed competitors using four-week sales data, Bernstein Research analyst Chris Hogbin said in a note, citing Kantar data. Tesco sales rose 4 percent in the month through Aug. 7, while Asda revenue climbed 4.7 percent, lagging behind smaller competitors J Sainsbury Plc (SBRY) and William Morrison Supermarkets Plc, Hogbin wrote.

‘Somewhat Disappointing’

Business at Tesco “remains somewhat disappointing, with the relative performance unchanged from last period,” the Bernstein analyst said. “Growth remains pressured by Tesco’s higher exposure to general merchandise, where growth remains subdued, given the current consumer climate.”

Asda said today that same-store sales rose 0.5 percent, excluding value-added tax, in the second quarter, slower than the 0.8 percent growth of the previous three months. The number of shoppers visiting Asda’s stores fell 1.2 percentage points, while the average transaction rose 1.7 percentage points.

Sainsbury, the third-largest grocer, fared better than its bigger rivals, holding its share at 16.1 percent, the Kantar data showed. William Morrison Supermarkets Plc was the only one of the four main supermarkets to increase its share, which rose to 11.7 percent from 11.6 percent.

German discounter Aldi Group boosted its market share to 3.6 percent from 3 percent a year earlier, according to Kantar, while Lidl’s share climbed to 2.6 percent from 2.4 percent.

Waitrose Ltd., the upmarket chain owned by John Lewis Partnership Plc, increased its share of spending to 4.3 percent, which Kantar said demonstrates a “two nations” theme.

Tesco shares were unchanged at 379.75 pence at 3:33 p.m. in London trading. The stock has declined 11 percent this year.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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