If one of our supermarkets has to die, Asda is looking the most vulnerable

There is widespread expectation that the German invasion of Britain’s grocery market will ultimately leave us with at least one less home-grown supermarket chain than we have now.

At one point, believe it or not, I used to hear people suggesting Sainsbury’s as the probable candidate, yet Morrisons has looked much more likely recently. But it couldn’t be Asda, now, could it? The Asda backed by Wal-Mart’s formidable financial muscle?

Well, while all the supermarkets have been bloodied, to a greater or lesser extent, by Aldi and Lidl, it’s Asda that has been bleeding heavily recently. It has just followed up an all-time worst 4.7 per cent quarterly sales decline at established stores with a 4.5 per cent slide in the most recent three months.

A business that now looks like a problem child in the Wal-Mart “family” is responding: you’ll be seeing price cuts and a revamp of stores. And if you think you might have heard this one before, that’s because it’s similar to what its rivals have been doing.

That shouldn’t come as a surprise – the big supermarkets aren’t as different as they might like us to believe. However, while Sainsbury’s has positioned itself as slightly more upmarket, prioritising quality and service while “investing in price”, and Morrisons is busily stressing its fresh-food offer, Asda’s USP has been based on price. Its marketing has been focused on that, and independent analyses have shown that for a long time its claim to be the cheapest of the big four has largely been justified.

But if price is your USP, you’re very exposed if someone comes along and undercuts you. Which is what the German pair have done.

The question now is, how low is Wal-Mart willing to go to respond in a market that is very different from its American heartland?

The dollar was blamed for Wal-Mart’s international operations “dragging down” what were otherwise a decent set of results. But the problems of the UK part of those operations had nothing to do with fluctuations in the currency markets.

In the meantime, industry data says Aldi and Lidl have breached the 10 per cent barrier for market share. They will eventually reach some kind of homeostasis in the UK market, but we’re some way from that point, and it bears repeating that this level is as high as 40 per cent in some of the markets in which they operate.

The supermarkets’ problems may only just be beginning. Asda’s in particular.

Airlines might have taken a battering, but that didn’t stop Carolyn McCall exuding confidence, and perhaps with good reason.

It’s not just that she was able to report record profits at EasyJet. While some passengers have become reluctant to fly in the wake of the Parisian atrocities, history is on her side when she says she believes this will prove short-lived.

It is during the summer that the bulk of EasyJet’s earnings are generated, and if things have calmed down, her customers will happily board her planes.

As they should, for flying remains just about the safest form of transport statistically. As a pilot once dryly intoned as I (a nervous flyer) landed at Heathrow: “The safest part of your journey is now over.”

That remains the case even now, although the latest attacks do require a security response. Indeed, many of Ms McCall’s more reluctant passengers will want to see evidence of one before flying again.

That is where her real problem may begin and there are two ways of handling it. Airports could look carefully at their operating procedures and hire and train enough staff to make any new systems as painless as possible.

Or they could simply tell passengers they should be thankful they’re keeping them safe, and they’ll just have to accept interminable queues, fractious children and a planeload of stress.

The problem for Ms McCall, and for her rivals, is that many airports will be inclined to select option two.

Airport misery could ultimately put off many more people than a terror threat.

Smiths Group, the manufacturing and metal-bashing mini conglomerate, is one company poised to benefit from a security crackdown. There was “good profitability growth” at its detection business – which makes airport scanners.

But it wasn’t this that made it the belle of the stock market’s ball. No, a deal over its pension funds did that – one that will free up £36m a year of cashflow. It had the market salivating at the possibilities this might open up for future corporate action.

I feel slightly suspicious every time I read about deals with pension trustees and scheme “derisking”. It’s sometimes years before any stings in the tails of these agreements become evident.

But that may be unfair in this case. Smiths appears to have gone some way to becoming an operating business with a pension fund, as a opposed to a pension fund with some operations tacked on, whose purpose is to feed it.

There are still quite a few UK companies in the latter category, with an immediate sting from the pension fund made obvious every time results are issued.

The market’s delight in one of them pulling itself out of the pensions crisis is understandable.