Tesco takes aim at rival Sainsbury with price cuts

Bloomberg

Tesco Plc racked up its 10th consecutive quarter of growth and cut prices in a pre-emptive strike against rivals preparing to challenge its role as the UK’s largest retailer.
The supermarket operator has lowered prices on its own-brand meat, fruit and vegetables, countering reductions promised by J Sainsbury Plc as part of its planned acquisition of Walmart Inc.’s Asda — a deal that could vault the combined companies ahead of longtime No. 1 Tesco.
The reductions followed faster-than-expected sales growth in the latest quarter.
“There are strengthening signs that Tesco is returning to some of its former glories,” Richard Hunter, head of markets at Interactive Investor, said.
In just under four years, Chief Executive Officer Dave Lewis has taken Tesco from a company in disarray to one of the industry’s most reliable performers by cutting prices and slashing costs.
As Tesco and the UK’s other large grocers weather the threat from discounters Aldi and Lidl, they’re also aiming to shore up their positions through mergers and acquisitions; before Sainsbury agreed to buy Asda, Tesco snapped up wholesaler Booker.
Tesco is cutting prices on its entry-level Farm Brands range: a 500-gram (18-ounce) pack of ground beef has been cut by 20 pence to 1.49 pounds ($1.97), while a 2.5 kilogram bag of potatoes has been reduced by 20 pence to 1.15 pounds.
The cuts were funded through buying larger quantities of products from fewer suppliers, Lewis said on a call with reporters.
In a bid to soften any regulatory opposition his company’s purchase of Asda, Sainsbury CEO Mike Coupe pledged to use the buying heft of the combined grocers to cut prices on commonly bought products by 10 percent. Lewis said Tesco planned to submit its thoughts on the deal to UK regulators.