January 12th, 2012
05:15 PM GMT
London (CNN) - Tesco has lost the price war it declared back in September – and the third-biggest retailer in the world (by sales) has issued a profit warning.
The UK company says its strategy of slashing 3,000 prices simply didn’t work, failing to entice enough shoppers through the doors to make up for smaller profit margins.
On hearing the news, investors in London carried out some swift price adjustments of their own, cutting shares by 62 pence (94 cents) each by the end of the day - a drop of almost 16%. The response of Tesco’s chief executive Philip Clarke is a brave one – he’s spending more money.
It might have been tempting to close supermarkets or sack staff to make up the difference, but instead Clarke’s investing in improving Tesco’s UK stores.
It’ll hit profits next year, but the Tesco boss is hoping he’ll attract more customers who like their shops both cheap and cheerful.
In cash-strapped Britain, Tesco’s customers are spending what they have wisely. It looks like management may now be following their example.
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