Tesco not ‘losing grip’ on UK grocery market despite persistent price war

Tesco is showing no signs of “losing its grip” as the UK’s biggest supermarket – despite battling an persistent price war and a plethora of higher business costs, experts say.

Investors will be hoping the grocery giant is maintaining sales growth when it publishes its half-year financial results on Thursday.

Tesco revealed its group sales rose by 4.6% in its first quarter, compared with the prior year, having been boosted by growing demand for own-brand and premium products.

It has been steadily growing its share of the UK grocery market – picking up 0.8 percentage points over the past year to 28.4%, according to the latest analysis by Worldpanel by Numerator.

Meanwhile, its biggest rivals Sainsbury’s and Asda have seen their share of the market edge lower, while German discounters Aldi and Lidl continue to gain customers.

Tesco’s shares have soared to their highest price in more than a decade amid the strengthening performance.

Richard Hunter, head of markets for Interactive Investor, said: “Expectations will be high as ever for the supermarket, although at the first quarter numbers in June there were no signs that the company was losing its grip on dominating the British aisles.

“Indeed, the juggernaut powered on, maintaining the light between the group and its nearest rivals.”

However, Tesco’s boss Ken Murphy acknowledged at the company’s most recent trading update that the grocery market was “intensely competitive”.

It comes amid continued pressure on pricing from rival supermarkets, with Asda slashing prices this year in a bid to help turn around its fortunes.

In April, Tesco said it expects to make as much as £400 million less in profit this financial year due to heightened competition.

Mr Hunter said the prospect of a grocery price war was “not one which Tesco is taking lightly, and is mindful of a renewed attack from Asda”.

He added that any updates to its annual profit forecast on Thursday would be “warmly received” by shareholders.

A group of analysts for AJ Bell said the grocery price war is expected to impact profits, but that Tesco was also experiencing “input cost pressure, notably wages, national insurance contributions and food prices”.

It is among major retailers to back calls to the Government to limit further tax rises on the industry, as they warn it is becoming increasingly difficult to “absorb” higher costs.

It comes amid concerns about food inflation, which has been accelerating for five months in a row.