Tesco pledges more price cutting

SUPERMARKETS giant Tesco's fighting talk and fabulous profits suggest there is little danger it will lose its edge.

The UK's biggest supermarket schain is 'looking to steal a march' on rivals Morrison and Asda by cutting prices ever further. It sees 'plenty of scope' for cuts for another few years at least.

Finance director Andrew Higginson brushed off fears of a tougher market now Morrison has bought Safeway.

He said: 'We have always been one of those who set the pace. We are fortunate to be leading and slightly in control of our own destiny.'

Rather than quaking about threats from rivals, Higginson said: 'The big worry is complacency - if you start to believe your own publicity.'

He reckons Tesco, Asda and Morrison will continue to gain ground against Sainsbury, which is set to drop to fourth place.

Ten years ago, when Asda and Tesco were weak and Sainsbury was leading, Higginson believes Tesco 'was out of line on price, a bit too expensive and a bit samey'.

Since then, Tesco's market value has soared far ahead of retail bigwigs Sainsbury and Marks & Spencer. Chief executive Sir Terry Leahy can claim some credit for its rise. Tesco's advice to ailing rivals is: 'You've got to give consumers what they want.'

Underlying earnings rose 22% to £1.7bn last year while pre-tax profits rose 18% to a record £1.6bn. Dividends rise from 6.20p to 6.84p.

Group sales rose 19% to £33.6bn, with £26.9bn coming from its 1,877 UK stores. These saw underlying sales rise 7.5% in the last quarter, second only to Morrison. Tesco expects growth to slow to 3%-4% this year.

The shares, which have climbed 35% over the past year, still look cheap at less than 15 times forward earnings. Broker Charles Stanley said: 'Tesco's hegemony of UK food retailing looks unassailable and the investment case on the stock looks very strong, if not unbreakable.'