Tesco Readies New Discount Stores to Take on Lidl and Aldi

(Bloomberg) -- Tesco Plc is readying a new chain of discount stores in the company’s most direct offensive on Aldi and Lidl to date.

The U.K.’s largest retailer is recruiting for staff to work in the new store format at sites in Immingham in northeast England and in Chatteris, about 80 miles north of London, according to postings on the LinkedIn social network. Tesco acquired both sites before Chief Executive Officer Dave Lewis took over in 2014 and they have been dormant since.

“Tesco will be competing with Aldi and Lidl in what they do best,” Berenberg analyst Dusan Milosavljevic said by email. It will need to be bold as “half-measure, trial-like” store openings are doomed to fail, he added.

Tesco’s plans are another symptom of the pressures exerted by Aldi and Lidl’s rapid growth since the 2008 financial crisis, which sparked a price war that slashed profit margins across the industry. The company’s dominance is under renewed threat from J Sainsbury Plc’s proposal to buy Walmart Inc.’s Asda in a $10 billion deal that would create a new leader in the U.K.’s grocery industry.

Tesco may name the chain Jack’s, in homage to its founder Jack Cohen, according to the Mail on Sunday, which reported that the company may begin opening the stores in September.

The chain will be Tesco’s second new format of stores since acquiring wholesaler Booker this year. Tesco has opened two Chef Central outlets, which stock larger sizes of products aimed at catering professionals and families looking to save money by buying in bulk.

Tesco also cut prices on its own-brand products last month and is forming a purchasing alliance with French supermarket Carrefour SA to increase its leverage with suppliers.

Aldi and Lidl have increased their U.K. market share to almost 13 percent, according to Kantar Worldpanel.

©2018 Bloomberg L.P.

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