Tesco raises pressure on rivals with price cuts
london — A new drive to cut food prices boosted Tesco’s quarterly sales, turning up the heat on rivals three years after Britain’s biggest retailer started work on a turnaround plan.
Shares in Tesco rose as much as three per cent on Friday after the group also said it was delighted with initial progress at wholesaler Booker, which it acquired in March, and was on track to deliver its medium-term financial targets.
The group’s robust update contrasted with the problems of Britain’s wider retail sector, which has seen a raft of failures this year.
Forced to rebuild after a 2014 accounting scandal capped a dramatic downturn in trading, Tesco said a move to lower prices on fresh food, such as minced beef and potatoes, towards the end of its first quarter reflected a growing confidence in its performance.
“It’s about us continuing to invest in the offer,” chief executive Dave Lewis told reporters, noting that prices in core lines had already been lowered by six to seven per cent over the previous three years.
The strong performance is timely as Tesco faces increased competition in a sector already reshaped by inroads made by Germanowned discounters Aldi and Lidl.
Accustomed to being the biggest beast in the industry, Sainsbury’s proposed £7.3 billion ($9.7 billion) takeover of Walmart’s Asda would push Tesco down into second place.
Looking at the broader retail industry, Lewis said he was pressing the government to be more supportive, particularly as regards a relaxation of business rates — property taxes for businesses.
The lower prices, plus a relaunch of own-brand products, helped Tesco to counter bad weather in March and deliver underlying sales growth in its home market of 2.1 per cent in its first quarter to May 26.