The City voiced disappointment over Tesco’s interim results this week but quickly dismissed speculation of an imminent supermarket price war.
Pre-tax profits were up six per cent to 371m for six months to August 15 1998, while like-for-like sales rose only 4.3 per cent, on three per cent volume growth. UK operating profit was up 5.7 per cent to 390m.
The supermarket’s statement says: “Sales growth in the UK continued to slow as consumer expenditure has eased and food inflation has fallen,” and lists value for money, customer service, product choice, store investment and its Clubcard as key areas. It will create 10,000 jobs this year in the UK and intends 50 of its stores to carry non-food goods, including home entertainment and clothing.
Tesco lowered prices on key lines, equating to a 20m investment over the year, but the statement did not indicate any unbudgeted price cutting following Asda’s price freeze on 12,000 food and clothing products and Sainsbury’s “Value to shout about” campaign.
Charterhouse Tilney analyst Andrew Marsh says: “Tesco has been moderate in its attack on prices. Sainsbury’s is banging the drum more than investing, and Asda’s price freezes are not surprising in the run-up to Christmas.”