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Tesco and Carrefour tie-up is good news for investors, says analyst

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Tesco's strategic partnership with French supermarket giant Carrefour should be "well received" by shareholders, an analyst has said. 

Tesco, the UK’s biggest supermarket, today announced plans to join forces with French rival Carrefour in a move that aims to lower prices and boost both brands’ competitiveness.

The two grocers are entering a “long-term strategic alliance” which should enable both companies to negotiate better terms with their major product suppliers.

The partnership, which is expected to be formally agreed within the next two months, will lead to joint purchasing of own brand products.

Tesco said it would enable both companies to “improve the quality and choice of products available to their customers, at even lower prices”.

Ian Forrest, investment research analyst at The Share Centre, said the news should be “well received by Tesco and its shareholders”.

He said: “The stock has already seen a good rise over the past year and this agreement should aid the continuation, especially in the battle with discounters such as Aldi and Lidl, as well as the growing challenge from Amazon. The news comes shortly after the group’s decision to streamline its business through removing well-known brands in a bid to beat Aldi and Lidl and elsewhere, the grocer has just days left of Tesco Direct before it closes for good.

“Last month, Tesco reported its tenth consecutive quarter of rising sales and confirmed the steady recovery seen under CEO Dave Lewis. Investors backing the management and the signs of improvement in recent results will have to be patient, but could be rewarded further in the near-future.”

Dave Lewis, Tesco Group chief executive, said: “I’m delighted to be entering into a strategic alliance with Carrefour. 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.”

Alexandre Bompard, chairman and CEO of Carrefour Group, said: “This strategic alliance between Carrefour and Tesco is a major agreement as it combines the purchasing expertise of two world leaders, complementary in their geographies, with common strategies.”

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