The announcement earlier today [Monday] by UK supermarket supremo Tesco that a further £70m (US$100m) would be invested in price cuts over the next year was overshadowed by allegations that some prices would be raised to pay for the cuts.
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The retailer was forced to defend its latest price-cutting initiative, involving over 1,500 food and non-food lines, after it came under fire last weekend. The Observer newspaper alleged that the cuts were a “scam”, and that Tesco’s website showed price increases on 1,750 popular items since Christmas. Safeway and other supermarkets joined in to attack the store.
Tesco insisted however that many of the price increases, on selected items such as alcoholic drinks for example, were the result of special offers coming to an end. A spokesman told Dow Jones Newswires that price cuts are funded through reinvestment of money saved by improved efficiencies in other areas of the business.
The retailer pointed out that after the new cuts are implemented, 15,000 prices would be cheaper than they were in January last year.
Tesco also stressed today that it is still confident of delivering annual results in line with analysts’ expectations on 9 April. The current consensus of analyst expectations puts the company at recording pre-tax profits of around £1.22bn for the FY to 23 February 2002, up from the £1.054bn posted last year despite a recent sales growth slowdown and the effects of the price cuts.
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By GlobalDataIn related news, a Sainsbury’s whistleblower has accused his former employer and Tesco of having an “understanding” not to undercut each other’s prices on popular products. To read more about this, click here.
