Tesco (LON:TSCO) is preparing to launch a new discount chain as early as September, the Guardian and Mail on Sunday have reported. The move will come amid stiff competition in the UK grocery market, which has seen German discounters Aldi and Lidl pressure profits at the ‘Big Four’ supermarkets.
Tesco’s share price has slipped marginally into the red in today’s session, having given up 0.27 percent to 257.20p as of 08:46 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.1 percent higher at 7,663.16 points. The group’s shares have added just under 50 percent to their value over the past year, as compared with about a 3.8-percent gain in the Footsie.
Tesco to launch discount chain
The Guardian reported on Sunday that insiders had said that Tesco could name its new discount chain Jack’s after a division of the grocery group recently attempted to register the name as a retail trademark. Britain’s biggest grocer is further advertising for staff for a new format in Immingham, Lincolnshire, and Chatteris, Cambridgeshire.
“If Tesco puts some proper welly behind it in terms of infrastructure and store openings it could stand a decent chance of success,” Bryan Roberts, an analyst at the retail marketing firm TCC Global, said, as quoted by the newspaper.
According to the Mail on Sunday, the FTSE 100 group’s executives have been combing through thousands of potential sites to examine which might be appropriate. The newspaper further reports that up to 60 could be transformed initially.
‘Not a copy of hard discounters’
The Financial Times meanwhile quoted Bruno Monteyne, analyst at Bernstein, as commenting that Tesco was in a position to launch the new stores because it would be able to supply them with its own-label Farm Brands.
“If Tesco is doing such a thing, it won’t be a copy of hard discounters,” the analyst pointed out, adding that the chain “will target the same price points and quality but will bring unique ranges and services”.