At 2.05pm on 14 March,  Asda issued a press release. Two-and-a-half hours later, the Tesco (LSE:TSCO) share price had fallen 8.7%. Such giant actions are uncommon for FTSE 100 shares — particularly grocery store shares — which are typically extra secure.

However the damaging response of buyers continued into the following buying and selling day when the share price of Britain’s largest grocer fell one other 4.4%.

Asda reported a 3.4% drop in like-for-like (LFL) gross sales in 2024. Nevertheless, in response to analysts, what appeared to spook buyers most concerning the announcement was the suggestion of a ‘price war’.

The grocery store’s chief govt mentioned the group “will add thousands more products to Rollback at regular intervals during the year as part of its strategic shift to move its entire product range to a new low ‘Asda Price’ by the end of 2026”.

Individually, he was extensively quoted as saying: “This is an investment warning, not a profit warning.” It’s all a part of the group’s technique to scale back profitability within the brief time period with a view to gaining market share over the following couple of years.

Déjà vu

Personally, I don’t know what the fuss is all about. We’ve been right here earlier than. The grocery market is without doubt one of the best industries round and I don’t assume it’s an exaggeration to say that these sorts of tales seem on a month-to-month foundation.

Listed below are simply two examples (and there are extra going again a long time):

“Supermarket price war leads to fall in grocery inflation” (Sky Information, April 2024)

“Who will survive the brutal new supermarket price wars?” (London Night Customary, January 2025)

One particular person’s trash is one other’s treasure

However the pullback in Tesco’s share price offered a possibility that I couldn’t refuse. I noticed it as an opportunity to purchase a high quality inventory at a knockdown price. So I did.

And my thought course of was a quite simple one.

Regardless of repeated makes an attempt by its rivals — together with Lidl and Aldi (the so-called ‘discounters) — to knock it from its primary spot, Tesco continues to dominate the market.

In line with the most recent figures from Kantar, it has a 28.3% share of the grocery market in Nice Britain. And it’s ranged between 26.5%-28.5% over the previous 5 years. This tells me that Tesco has efficiently overcome earlier threats. Collectively, J Sainsbury and Asda have 28.3%.

And in contrast to Asda, the grocery store big had its “biggest ever” Christmas. Throughout the group, LFL gross sales have been 3.8% greater. In Central Europe, they have been up 4.7%.

However I acknowledge there are dangers. Asda has deep pockets – it’s owned by a billionaire household and a personal fairness agency. And in a sector the place margins are wafer skinny, even a small lack of market share might have a huge impact on earnings.

And to be trustworthy, I think Tesco’s share price will stay within the doldrums for some time now. Buyers will in all probability need to see some proof that it’s enterprise as regular earlier than confidence is restored.

Nevertheless, till then, I’ll take consolation that the inventory’s at present (19 March) yielding 3.9%, slightly above the FTSE 100 common. However I settle for there are not any ensures with regards to dividends.

Time will inform whether or not I’ve made the appropriate choice. However for now a minimum of, I’m happy to incorporate Tesco in my Shares and Shares ISA.