Published: Mon, June 18, 2018
Markets | By Otis Pena

Tesco steps up challenge to rivals with new price cuts

Tesco steps up challenge to rivals with new price cuts

"There are strengthening signs that Tesco is returning to some of its former glories", Richard Hunter, head of markets at Interactive Investor, said by email.

Sales at Booker, which were included in the group for the first time this quarter, jumped 14.3% as it won new clients but growth at the main Tesco chain slipped back to 2.1% from 2.4% in the previous quarter.

Tesco said that like-for-like sales in its Irish operations grew by 3% despite all of its stores here closing for a day due to Storm Emma in early March.

Tesco said a drive to lower prices for customers had boosted its quarterly sales, in an ominous warning for rivals three years after the United Kingdom retailer embarked on a turnaround programme.

The group delivered positive like-for-like growth for a tenth consecutive quarter, with an improvement of 1.8%.

Tesco now dominates Britain's supermarket sector by a clear margin, with a 27.7% market share, according to industry data.

However, Sainsbury's' proposed £7.3 billion takeover of Walmart's Asda would push Tesco down into second place, posing a serious threat to the group.

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Despite a strong underlying performance in Central Europe, with growth in fresh food and improving performance in Hungary, overall like-for-like sales were down 1 percent in the quarter.

"Our growth plans are on track and we are pleased with the momentum in the business", said Tesco chief executive Dave Lewis.

Tesco shares rose 5p to 254¾p.

The supermarket revealed in its quarterly trading update that its Tesco Magor distribution centre in South Wales is stocking 3,000 Booker lines and Tesco Middleton distribution centre, Manchester, will help to ensure Booker is able to meet demand over the busy summer trading period.

'We are delighted with initial progress on Booker, and are focused on delivering the synergy benefits that our merger brings'.

Prior to Friday's update analysts were on average forecasting a group operating profit before exceptional items for the 2018-19 year of 2.092 billion pounds, up from 1.644 billion pounds in 2017-18, according to Reuters data.

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