Tesco Plc becomes more oriented towards lower prices and online grocery business

Permanently cheaper prices on some items will be offered by Tesco Plc, which is currently the largest retailer in the U.K. The company is trying to replace overly complex promotions in order to stabilize sales and increase its constantly declining market share.

According to the researcher Kantar Worldpanel, Tescos market share has decreased to 29.2% from its 2007 peak estimated to 31.8%.

The domestic sales of Tesco Plc have been decreasing over the last two years due to the customers shift to both discounters and upscale grocers.

Yesterday, the Chief of the company in the U.K. Mr. Chris Bush explained that the company is becoming more focused on “lower, more stable prices”. At an investor conference in London, Mr. Bush also revealed that an additional 200 million pounds (333 million dollars) will be spent by the company on an yearly basis as Tesco intends to make permanent discounts of everyday items prices.

Mr. Chris Bush also explained that the grocers promotions had become too complicated, which resulted into the trend of customers shifting to discounters Aldi and Lidl, as well as to more upscale chains such as Waitrose.

At the conference, Philip Clarke, Tescos Chief Executive Officer, made a statement, which was cited by Bloomberg: “Our numbers are not where we want them to be.” Mr. Clarke also said that a reduction in spending on opening supermarkets announced on February the 25th, will free resources to speed up growth in the fast-growing areas of online and convenience stores.

The Chief Executive Officer of the company also commented: “The margin will be what the margin will be. What we want is the most compelling offer for customers. Thats going to take us some time.”

The company announced that 150 new convenience outlets will be added on an annual basis. Tesco Plc also revealed that it will become even more focused on its online grocery business, whose 2013 trading profit was estimated to 127 million pounds.

Tesco Plc fell by 4.28% to 320.85 pence by 12:08 GMT in London, marking a one-year change of -12.03% and trimming the companys market value to 27.11 billion pounds. According to the Financial Times, the 18 analysts offering 12-month price targets for Tesco Plc have a median target of 338.00 GBX, with a high estimate of 395.00 GBX and a low estimate of 270.00 GBX. The median estimate represents a 0.84% increase from the previous close of 335.20 GBX.

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