UK's Tesco is planning a chain of discount stores: Sunday Times

FILE PHOTO: A company logo is pictured outside a Tesco supermarket in Altrincham, Britain April 16, 2016. REUTERS/Phil Noble/File Photo

LONDON (Reuters) - Supermarket group Tesco, Britain’s biggest retailer, is planning a chain of cut-price stores to counter the growth of discount rivals Aldi and Lidl, the Sunday Times newspaper reported.

The paper said Tesco TSCO.L was understood to be developing a separate brand that would match its German competitors on price with a more limited range than in its main stores.

Tesco had no immediate comment on the report.

Data from research group Kantar Worldpanel on Tuesday showed sales at Tesco grew by 2.6 percent in the last 12 weeks but all of Britain's four biggest supermarkets had lost market share to Aldi ALDIEI.UL and Lidl.

Tesco has a 28 percent share of the British grocery market. Aldi’s sales increased by 16.2 percent and Lidl’s by 16.3 percent, boosting their respective market shares to 6.9 percent and 5 percent.

Tesco has tightened its hold on the nation's food market after the competition regulator last month cleared its 3.7 billion pound ($4.95 billion) takeover of wholesaler Booker BOK.L.

Following an accounting scandal in 2014, Chief Executive Dave Lewis’s strategy to rebuild the supermarket group has been based on increasing food sales.

Reporting by Michael Holden; Editing by David Gregorio