Tesco boss Ken Murphy has admitted its rivals have “upped their game” as he revealed the supermarket was encountering “intense competition” in the price war, despite reporting first quarter like-for-like sales in the UK rose by 5.1%.
Tesco’s sales hit £12.3bn in the quarter as its market share climbed to 28% in the latest Kantar results.
Murphy, who earlier in the year was openly dismissive of Asda’s attempted fightback with price cuts, was much more complimentary about his rivals today.
“We are definitely seeing an intensifying of competition,” he said. “We’re going toe to toe together and everyone has upped their game a notch.”
Murphy’s comments are in stark contrast to his remarks in January when he questioned the firepower of competitors to sustain a price war, saying Asda had issued “bold claims” but not backed them up with actions on the shelf.
Today the Tesco boss said: “We are seeing interesting competition from all aspects of the market.”
But Murphy added: “We are responding really well and customers are recognising we are competitive across all aspects of the shopping trip, not just price.”
Tesco food sales were up 5.9%, with a strong contribution from fresh food, whilst its Finest sales were up 18% year-on-year.
Murphy said the good summer weather so far had helped drive sales in food and non food and also across its Booker wholesale operation.
Tesco’s online sales were up 11.5%.
Reacting to the results Clive Black, an analyst at Shore Capital, said Tesco remained a dominant force despite increased competition.
“Murphy speaks of the UK trading environment remaining intensely competitive,” Black said.
“We sense Tesco has been keeping a close eye on Asda, as the latter seeks to stabilise its trading momentum through the Roll Back to Asda Price journey, but as yet this is not a destabilising force for sector gross margins.
“That said, if the industry wobbles in its discipline, Tesco is ready for the fight.”
Murphy also called on ministers not to hit retailers with further costs from the Treasury, amid speculation of more taxes in the pipeline following yesterday’s spending review by Chancellor Rachel Reeves.
He said retailers were still reeling from a raft of extra costs introduced in the last budget.
“We had national living wage which we wholly support, we had the increased NIC costs, we had employment legislation costs, we had extended producer responsibility costs through packaging, we have the deposit return scheme coming next year and clearly we are waiting on the business rates review with great interest.
“If you add up all these costs they have a substantial impact on the retail industry, and we would strongly urge and hope that the government would not be looking to place additional burdens on the retail industry at this stage.”
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