Tesco share price: Discount chain sees slow growth

Growth at Tesco’s (LON:TSCO) Jack’s stores has been slow, about a year after the discount chain was launched, the Guardian has reported. Britain’s biggest grocer announced Jack’s last year in an effort to battle German discount rivals Aldi and Lidl which have pressured profits at the UK’s ‘Big Four’ supermarkets.

Tesco’s share price has fallen marginally lower in London this morning, having given up 0.37 percent to 239.50p as of 10:12 BST, marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.13 percent lower at 7,357.70 points. The group’s shares have added about two percent to their value over the past year, as compared with less than a one-percent gain in the Footsie.

Tesco’s Jacks sees slow growth

The Guardian reported yesterday that Tesco had opened just 10 of its discount Jack’s stores over the past year, and had revealed at an investor event that the chain had generated sales of 24 million, which experts see as disappointing.

“That is very small given the store footprints – we would look to get double that and still be disappointed,” said an executive at a rival supermarket chain, as quoted by the newspaper. “It’s an interesting experiment, but based on those sales figures Jack’s is probably costing more than it is making, and I’d question what they are really learning from it.”

The Guardian further quoted Bruno Monteyne, an analyst at Bernstein, as commenting that Jack’s was a research and development format which was not material to Tesco’s finances at this stage.

“If it works […] they will tell us. If it doesn’t, it probably will be closed,” he pointed out.

Analysts on FTSE 100 supermarket         

The 15 analysts offering 12-month targets for the Tesco share price for the Financial Times have a median target of 280.00p, with a high estimate of 315.00p and a low estimate of 220.00p. As of September 13, the consensus forecast amongst 23 polled investment analysts covering the blue-chip grocer has it that the company will outperform the market.

Tesco is scheduled to update investors on its interim results on October 2.