Tesco continues to face strong headwinds as competitors ramp up their capabilities, says Kantar Retail

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Tesco will continue to face strong headwinds as competitors ramp up their capabilities, according to Himanshu Pal, vice president at Kantar Retail.

Pal cited Sainsbury’s acquisition and subsequent integration of Argos and Morrisons’ partnerships with Amazon and Ocado as potential threats, as Tesco reported its third consecutive quarter of like-for-like sales growth.

Phil Dorrell, partner, Retail Remedy retail consultants , agreed. “We are entering the golden quarter for grocery and Tesco will be up against a resurgent Morrisons, a wounded but not down Asda and a Sainsbury’s armed with Argos,” he said. “Tesco will have room to push further on price if they need to and a rash of offers lined up ready to deploy.”

Pal said Tesco’s  like-for-like sales growth vindicated some of the structural changes boss Dave Lewis has made.

“The business has benefited from divestment of non-core assets and its return to the basics; i.e. focus on simpler pricing (permanently lower prices rather than complicated promotions) improved quality of fresh foods (especially farm brands) and in-store service levels,” he said.

“While Tesco continues to lose shopping trips to discounters such as Aldi and Lidl, it has managed to offset the decline by gaining share from other parts of the market, especially Asda.

“And the recent disclosure around its pension deficit is likely to accentuate the focus on cash management fuelling further speculations around divestments of international markets in Southeast Asia and Central Europe.”