Following the planned £12 billion merger of rivals Sainsbury’s (LON:SBRY) and Asda (NYSE:WMT), Tesco (LON:TSCO) and French supermarket Carrefour (EPA:CA) plan to form an alliance to buy products and lower prices.
The proposed deal with Carrefour comes after Tesco’s recent £3.7 billion takeover of wholesaler, Booker. The deal sets out a plan to cooperate on product sourcing and purchasing, with ambitions to widen the range of products they have on offer while reducing prices.
Tesco chief executive, Dave Lewis, said, “By working together and making the most of our collective product expertise and sourcing capability, we will be able to serve our customers even better, further improving choice, quality and value.”
After share price appreciation in June, the first day of July’s trade has seen a modest rally from 256p to 257.1p.
The company’s market share is down 0.2 percent on this period last year but sales are up 1.4 percent. Citigroup, Deutsche Bank and HSBC have a ‘buy’ stance on the stock, while Shore Capital have already reiterated their ‘buy’ stance for Tesco stock in July.
Tesco are outperforming Sainsbury’s and hope lower prices will help them compete with Aldi and Lidl. Steps will have to be taken to mitigate the threat posed by Amazon’s move into food sales, with their recent purchase of Whole Foods and the creation of Amazon Go.