Tesco has considerable scope to cut costs by reducing its growing SKU count - which is estimated to be 30% higher than Asda’s in large stores, analysts at Brewin Dolphin have said.

In an extended note on Tesco, they argued the fact that Asda stocks significantly fewer SKUs in its large stores than the 35,000 in large Tesco stores was one of the reasons Asda was able to charge lower prices, while maintaining a similar operating margin of about 5%.

Tesco also has a large - and growing - range online. Its online food and drink SKU count has risen 12% year on year and now totals 24,967, compared with 18,871 at Asda [BrandView.com].

“We are not advocating moving to an Aldi model, which has a mere 3,000 SKUs, but we definitely see the possibility for Tesco to cut its SKUs,” said Brewin analyst Nicla Di Palma.

Reducing the range would also help improve availability and cut waste, Di Palma added.

In another extended investor note on Tesco this week, HSBC said it believed Tesco needed to take out £1bn from the cost base over the next few years - equivalent to about 8% of UK and ­central costs.

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