Tesco store
Tesco store

Tesco is stepping up its price war against rival Aldi as it prepares for the coronavirus crisis to plunge the UK into deep recession.

Dave Lewis, chief executive of Tesco, said the grocer was extending its Aldi Price Match to almost 500 products and was seeking “further opportunities” in making its items more affordable.  

It came as the supermarket said it had seen net gains of customers switching from Aldi to Tesco for the first time in a decade. 

Mr Lewis said: “We are extending Aldi Price Match to nearly 500 Tesco and branded products and will continue to seek further opportunities to bring even greater everyday value to customers at this challenging time.”

He added that Tesco’s average prices were now broadly level with its Big Four competitors, Sainsbury’s, Asda and Morrisons, compared with six years ago when it was 7pc more expensive. 

Neil Shah, director of research at Edison Group, said Tesco had “clearly benefited from their revised strategy, helping them restore confidence in the group”.

A shopper passes empty shelves at a Tesco supermarket in London - ANDY RAIN/EPA-EFE/Shutterstock
A shopper passes empty shelves at a Tesco supermarket in London – ANDY RAIN/EPA-EFE/Shutterstock

But he warned that consumer habits could shift as the UK emerges from lockdown.

“Investors should keep a close eye on the company, since the group operates in a crowded market with retailers Aldi and Lidl continuing to gain market share and current results might not be replicated when the UK is lifted from lockdown,” he said.

Britain’s Big Four grocers have enjoyed booming demand during the crisis as consumers stockpiled store cupboard items and spent more when shopping online. A resurgence in home cooking has also benefitted the supermarkets with restaurants remaining closed during the lockdown. 

Tesco reported an 8.2pc rise in like-for-like sales to £12.2bn at its UK and Ireland business during the 13 weeks to May 30, boosted by a significant rise in online orders.

Online sales in the UK soared by 48.5pc during the period, jumping by 90pc in May alone. In Ireland they grew 51pc in the 13-week period and by 106pc in central Europe. Tesco now has the capacity for 1.3m delivery slots per week, compared with 600,000 pre-crisis and expects online sales to grow by £2bn this year.

Tesco said its customers had been making fewer trips to its supermarkets during lockdown but had been doing bigger shops when they visit, with the amount being bought rising by almost two-thirds.

Despite a strong performance at its supermarkets, sales at Tesco Bank slumped 26.5pc due to the closure of its travel money business and a reduction in its ATM usage as more people used card payments during the lockdown. 

Tesco has increased its provision for potential bad debts at the bank, which is expected to make a loss of between £175m and £200m this year.

The grocer has also seen a substantial increase in costs as a result of the pandemic, which will set it back £840m this year. Tesco has so far spent £65m on safety equipment for staff such as face coverings and has seen further costs from providing paid leave to vulnerable workers and recruiting 47,000 temporary staff.

Tesco is facing a backlash among investors at its general meeting today after the board granted a £2m bonus to Mr Lewis, who is stepping down on Oct 1 to be replaced by Ken Murphy. 

Mr Lewis declined to comment, saying the matter was a “question for the board”. 

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