Tesco targeting Asda in £200m price war

SUPERMARKET giant Tesco is launching a £200m price war with rival Asda as its chief executive prepares to retire after 14 years at the helm.

Sir Terry Leahy, Chief Executive, Tesco

SUPERMARKET giant Tesco is launching a £200m price war with rival Asda as its chief executive prepares to retire after 14 years at the helm.

The group is lowering prices on more than 1,000 items and promising to pay shoppers “double the difference” on products found cheaper at Wal-Mart owned Asda.

Its move to up the ante against resurgent competitor Asda comes on the same day that Sir Terry Leahy celebrates his last day in charge – and his 55th birthday.

Sir Terry – hailed as one of Britain’s great retailers – will hand over to successor Philip Clarke tomorrow after transforming the supermarket from the UK’s number two chain to the clear market leader and an international force.

Mr Clarke takes over amid a mounting price battle with Asda, which has been leading a sales growth revival with its Asda Price Guarantee – relaunched in January pledging to sell groceries at least 10% cheaper than its major rivals.

Asda last week revealed a robust Christmas trading performance that left rival Tesco in the shade, reporting like-for-like sales up by 2.6% including VAT in the final quarter of 2010 against Tesco’s sales rise of 0.6% for its six-week festive period.

Tesco’s new front in the price war suggests Mr Clarke is keen to ensure Tesco retains its title as the UK’s most successful supermarket player.

Sir Terry, who was knighted in 2002 for his services to food retailing, has overseen a leap in pre-tax profits from £750m in 1997 to more than £3bn in the group’s last set of annual figures.

The chain now operates in 14 markets internationally – a more than three-fold increase since Sir Terry took over from the then chairman Lord MacLaurin.

A life-long Tesco employee, Sir Terry joined in 1979 and held a number of marketing and commercial positions before being appointed to the board in October 1992 and then chief executive on February 21, 1997.

Notable milestones since he took on the top job include the launch of Tesco.com and later the fast-growing non-food offering Tesco Direct, Tesco Finest in 1998, and more recently expansion into America with the Fresh & Easy chain.

The group’s non-food and international growth achievements are seen as being among his major success stories, accounting for ever larger shares of its revenues.

Investors have also seen shares quadruple in value since 1997, rising from around £1 to some £4 now.

While there has been much speculation over what Sir Terry will do next, he has yet to reveal his plans.

New boss Mr Clarke – who comes in at the start of Tesco’s new financial year – is also a Tesco lifer. Mr Clarke started at Tesco in a part-time job while he was at school in Liverpool and later joined the management training scheme after leaving university.

He joined the board 12 years ago, heading up the supply chain operation, and assumed responsibility for IT a year later. In January 2004, he took charge of international operations in addition to his IT role.

 

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