Tesco plans to reduce prices by $146 million

Tesco Plc, the UK’s biggest supermarket chain, said it’s cutting prices by $146 million ( £100 million) after competitor Asda announced discounts on more than 1,000 products less than a week ago.

The reductions will take effect this month and cover more than 3,000 items, Cheshunt, England-based Tesco said on Tuesday in an e-mailed statement. Asda, Wal-Mart Stores Inc’s UK chain, cut prices on products including meat, frozen food and toiletries.

Supermarkets are battling harder for customers as household spending weakens. UK consumer confidence fell to the lowest since at least 2004 last month as the recession deepened and people lost their jobs, Nationwide Building Society said on Tuesday.

Tesco fell as much as 1.6 per cent in London trading after Merrill Lynch & Co cut its rating to “neutral” from “buy.” The stock was down 2.2 pence to 358.7 pence at 8:48 am local time. Merrill also lowered J Sainsbury Plc, the UK’s third- largest supermarket chain, to “underperform” from “neutral.”

Tesco said it will start an advertising campaign tomorrow that will compare prices of baskets of goods from Tesco, Asda, Sainsbury and William Morrison Supermarkets Plc. The supermarket operator said 1.1 million baskets of shopping were cheaper at Tesco than they would have been at Asda on January 2.

Tesco said its discounts include three packs of meat for 10 pounds and three Hovis bread loaves for 3 pounds.