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The value of Tesco, Sainsbury’s and Marks & Spencer has plummeted by more than £4bn since Friday amid fears Asda will launch a vicious price war to win back customers.

Tesco has taken the biggest hit, with its share price down almost 15% since Friday. Sainsbury’s is down over 9%, while M&S has fallen 10%.

It came after Asda warned its profits would likely drop this year as it deployed a “war chest” to slash prices and lure back shoppers.

“What we are flagging is a significant investment that will materially reduce our profit this year,” executive chairman Allan Leighton told The Grocer.

“I look at this as a sign of investment rather than a profit warning and a sign we have built a significant war chest.”

Supermarkets are already facing huge hurdles this year given the rise in National Insurance and minimum wage, plus ongoing concerns over tariff wars and inflation.

“It’s hardly surprising that investors are nervous about the potential impact on profits all those headwinds might have, especially if price wars become supercharged,” said Danni Hewson, head of financial analysis at AJ Bell.

Asda’s push to win shoppers back would likely be felt across the industry, said Frederick Wild, a retail analyst at Jefferies, adding that Tesco and Sainsbury’s had been “major beneficiaries of market share from Asda over the last couple of years”.

He questioned, however, whether Asda could commit to the scale of cuts its proposed if volume growth did not considerably improve.

Asda’s sales have continued to slide with its latest annual results on Friday showing a 3.4% drop in like-for-like sales last year.

Its market share has slipped to 12.6% from 14.6% when it was bought by the Issa brothers in February 2021, according to Kantar.

Clive Black, the head of research at Shore Capital, said Asda had made a “clear and necessary” decision to invest in prices, but this was “set against a sceptical and reluctant supply chain”.

While he said other supermarkets “irrationally” now cutting prices and hurting margin was the biggest concern, “we need to remember too that the listed players are better grocers than Asda with a broader customer set, stronger balance sheets and a will to remain competitive”.

Asda was the only supermarket to register a decline in sales during the start of the year, with sales down 5% in the 12 weeks to 23 February, Kantar said.

Morning update

Gusbourne’s shares will be traded publicly for the last time today, with the English winemaker set to become a private company from tomorrow. 

Shareholders approved the move on 7 March after a strategic review in which the board weighed the costs and benefits of remaining public. Remaining listed on AIM was deemed to be too expensive and volatile. 

By delisting, the board argued the company could save at least £250k a year. 

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