Tesco shares climbed by three percent, giving the company’s Chief Executive, Philip Clarke, some breathing space, allowing him to pursue his long term plans to invest one billion pounds in store refurbishments and price cuts in a bit to revive the struggling chain.
Tesco, and other supermarkets such as Asda and Sainsbury, are currently under pressure from foreign discount stores such as Aldi and Lidl. Even traditionally higher-end stores such as Marks and Spencer with is Simply Food chains are feeling the pressure, and struggling to match prices offered by out of town discounters that specialise in volume trade. Many analysts are concerned that the more traditional supermarkets may lose a price war if they allow one to begin, thanks to high rent, long leases, and weaker purchasing power.
The good news for Tesco temporarily boosted supermarket shares, however, with Morrison seeing a share price rise of 1.2p, and Sainsbury matching that increase. Other non-food retailers also benefited, with Sports Direct International being the top performer of the day, gaining 42p thanks to a positive note from broker Bank of America Merrill Lynch, who said that they saw strong trading potential thanks to their online growth and the chains plans to expand into Europe.