Tesco boss Ken Murphy has accused rivals including Asda of embarking on “irrational” price cuts and said he expects even more intense competition in the run-up to Christmas.
The UK’s biggest supermarket raised its profit forecasts today after reporting UK sales for the first half of the year up 4.9%.
However, earlier this year Tesco lowered expectations by £400m after Asda ploughed hundreds of millions into a wave of Rollback price cuts in a bid to claw back lost share.
At a results call today, Murphy was asked if he believed the price war between supermarkets would remain “rational” in the vital run-up to Christmas.
He said: “Some competitors went pretty strong at the start of the year with their statement of intent and they’ve acted on that.
“It doesn’t feel that rational from where I’m sitting. The share of our results is testament to that.
“We’ve invested very heavily in price to maintain our momentum.
“And we’re actually anticipating the second half could be even more intensive, we’re certainly not anticipating it to be less intensive.”
Meanwhile, Murphy also launched a scathing attack on the Chancellor’s taxation measures and called for Rachel Reeves to back down from any more increases in the looming November budget.
There were reports today Reeves is considering backtracking on plans to hit large retailers with a higher rate of business rates, a policy Murphy said would cost Tesco alone £700m.
“Without a doubt some of the costs that the industry has had to be bear over the last 12 months have impacted on the cost of businesses,” Murphy said.
“We’d love to see a budget that’s pro growth and pro jobs, which as a result will help people with the cost of living.
“Our one ask is don’t make it harder for the industry to deliver great value for customers.
“In the last budget, the industry incurred substantial additional operation costs and we’re doing our best to deal with them but enough is enough.”
The Grocer revealed last month that Treasury officials had floated the idea of extending Sunday opening hours in a bid to mitigate the impact of its proposed rates reform.
Murphy told The Grocer today: “We would have to see concrete plans before making any call on that.”
However, the Tesco boss also sent a combative message to suppliers sharing in the impact of the government’s wave of extra costs on businesses.
With the first extended producer responsibility invoices landing this month, the BRC reported this week that retailers planned to pass the vast majority of the cost on to consumers.
However, a report prepared for YouGov by The Groceries Code Adjudicator this week revealed that branded suppliers had met a “wall of silence “ from supermarkets over the impact of the costs.
Murphy told The Grocer it was up to suppliers to share the burden of absorbing the extra costs to protect consumers.
“We’ve embarked on a very aggressive savings programme in the first half of this year and we’ll maintain it into the second half to offset as much as possible the costs that are coming at us to minimise the impact on customers, and our message to suppliers will be the same.
“You guys need to do your part and we will work together with our suppliers to help improve effectiveness but we have to do a job collectively to try to absorb the cost without it being passed on.
“We’re in a very competitive environment which frankly doesn’t care about EPR or any of these extra costs.”
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