Tesco launched a fierce price war against rival supermarket Asda at
its interim results this week, promising the ’biggest price cuts ever
seen’, with cuts of 10% on ’core items’.
The announcement is in response to Asda’s new commitment to slash prices
by between 5% and 10% on 10,000 products over the next 18 months.
Tesco remained tight-lipped about which products would be affected,
saying only that they would make a ’significant difference to household
budgets’.
Asda, which is rolling back prices to bring it in line with its parent
company Wal-Mart in the US, has said it will focus its price cuts on
health and beauty products, household products and soft drinks.
Tesco’s half-year results showed group sales rose 9.9% to pounds 9.1bn,
which contributed to a pre-tax group profit of pounds 401m, up 8.1% on
last year.
In the UK, sales grew by 7.3% to pounds 8.2bn, contributing to a pounds
426m UK operating profit.
Tesco revealed that in the first half of the year, it invested pounds
130m in price cuts. This figure is expected to double to between pounds
250m and pounds 300m over the next six months.
The retailer is hoping to extend its internet home-shopping service,
which currently serves 80,000 customers from 50 stores.
The supermarket is also investing significantly in its internet retail
operation.
In the autumn, Tesco will go head-to-head with companies including
Amazon.com and WH Smith and start to sell books from its site.
It has plans to expand its joint venture with mail order clothing
company Grattan, and has also committed itself to extending its Tesco
personal finance service onto the internet.
However, the company declined to comment on when its online banking
service would become available.
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