The early market reaction to Tesco’s (TSCO) launch of its new discount chain Jack’s seems tepid at best with the shares falling 1% to 232.8p.
Sainsbury’s (SBRY) is down 1.3% to 316.6p as its merger with Asda heads for an in-depth probe by the Competition and Markets Authority after an initial review found sufficient grounds for concern over the impact on consumers.
JACK’S - WHAT’S IN THE BOX
Some early snippets on Jack’s include news that two stores will officially open tomorrow - one in Chatteris, Cambridgeshire where analysts and journalists are today attending a launch event and the other in Immingham, Lincolnshire.
The plan is to open a total of 15 stores this year some already in existing Tesco properties, some new and some repurposed. The company is pledging that eight of ten Jack’s products will be British.
There may be some market disappointment that the initial roll-out is not more ambitious. After all, 15 stores are unlikely to make much of a dent in the rough 13% market share of the German discounters Aldi and Lidl which this new venture is surely targeted at.
Ahead of the launch Shore Capital analyst Clive Black, a buyer of Tesco with a 235p price target, observed: ‘All in all, Tesco has been re-engineering, for which Mr. Lewis deserves great credit. Jack's arrival is interesting to us whilst the broader story is one for further travel.’
TESCO ‘STREETS AHEAD’
Reacting to the Sainsbury’s news AJ Bell investment director Russ Mould says: ‘Sainsbury's chief executive Mike Coupe's on-camera 'We're in the Money' moment after a merger was announced with Asda back in the spring may not just have been an embarrassing gaffe but also somewhat premature.’
He adds: ‘Tesco has already bolstered its position with the acquisition of Booker and is now ready for the next part of its evolution.
‘At the moment it is streets ahead of Sainsbury's, both in market share terms and strategically in the fight of the supermarkets. And any major setback to the Sainsbury's/Asda deal would certainly give Tesco another boost.’
