Tesco’s plan for high end convenience stores spooks the market
Shares in supermarkets have fallen sharply after Tesco said it was considering plans for a new chain of high-end convenience stores. The proposal for a chain based on its Tesco Finest food range comes nine months after the supermarket giant opened discount retailer Jack’s.
Although Tesco has set no date for its latest venture, upmarket rivals Marks & Spencer and Ocado saw their shares fall 3.5% and 4% respectively.
Tesco’s own share price was volatile. It made gains at the start of the day, then went into reverse, but was up 0.25% by mid-afternoon. Sainsbury’s shares were down 0.8%, while Morrisons’ were up 0.7%.
The market reaction came after Tesco chief executive Dave Lewis unveiled the Finest stores plan to analysts and investors on Tuesday.
Speaking on Wednesday, Mr Lewis said: “Tesco Finest as a brand is one of the largest food brands in the country. We have a very high percentage of more upmarket customers.
“The opportunity to curate that range and bring new things in a more convenient outlet is something that we have tested, is something we’re interested in.” If it comes to fruition, the move has the potential to upset the plans of M&S and Ocado, who confirmed in February that they were setting up a joint venture.
Under that deal, M&S will buy a 50% share of Ocado’s retail business for £750m. It will then deliver M&S grocery products from September 2020 at the latest, when Ocado’s deal with Waitrose expires.
But while Tesco mulls the possibility of high-end outlets to compete with the likes of M&S’s Simply Food stores, there appears to be a question mark over the future of Jack’s, which was designed to take on discount retailers Lidl and Aldi.
Tesco has not announced any plans for adding to Jack’s nine stores.
Since the discount chain opened its first outlets in September last year, it has sold £24m of products.