London Briefing  It's not often that Britain's biggest retailer gets outmanoeuvred, but Tesco's plans to branch out into the booming £5 billion-a-year (€7.42 billion) gardening market have suffered a serious setback at the hands of billionaire entrepreneur Sir Tom Hunter, writes, Fiona Walsh.

When the supermarket group launched its £156 million bid for the 21-store Dobbies Garden Centres chain earlier this month, it caught the City on the hop. Gardening is a new area for the group and analysts were surprised by the move.

But Tesco chief executive Sir Terry Leahy made great play of the opportunity Dobbies offered to boost sales of "eco-friendly" products, and made it clear that the business would be expanded rapidly. Ultimately, analysts see a Tesco-owned Dobbies broadening out into organic food and other green product ranges.

Terms were agreed by the board of Midlothian-based Dobbies and the deal looked in the bag. But Tesco appears to have underestimated Sir Tom, who did not become Scotland's richest man without pulling off a deal or two himself.

Already sitting on a 10.6 per cent stake in Dobbies, he launched a quick-fire series of raids on the shares, more than doubling his holding and taking it through the key 25 per cent level.

His 25 per cent shareholding is significant because, at that level, Sir Tom's West Coast Capital vehicle can block Tesco from taking control of Dobbies.

Tesco has already abandoned plans to buy the business via a scheme of arrangement - which is cheaper and quicker than a traditional bid - because that would need the approval of 75 per cent of the shares. It has also been forced to lower its acceptance level to 50 per cent.

Sir Tom paid as much as £18.45 for some of his shares, a significant premium on Tesco's £15-a-share terms. He may decide to launch a rival bid, in which case, under takeover rules, he would have to offer at least £18.45 a share, valuing Dobbies at £190 million.

He could be planning to simply sit on his stake and get in Tesco's way. Or his plan may be an attempt to force higher terms from Tesco, in which case he could sell his stake at a significant profit.

Either way, it is certainly not what Sir Terry envisaged when he launched the offer. The stakes are high for both sides - Tesco does not like to fail, while Sir Tom is also used to winning. He already owns Wyevale Garden Centres, the country's biggest specialist gardening chain, along with the smaller Blooms of Bressingham, and understandably does not relish the prospect of Tesco emerging as a powerful new competitor.

The City is rather enjoying the scrap - as are Dobbies' shareholders. But despite their board's acceptance of Tesco's terms, investors are highly unlikely to accept £15 a share when Sir Tom has been offering £18-plus in the market. The next move is eagerly awaited.

Meanwhile, the importance of expansion into fast-growing sectors was underlined last week as Tesco warned of a slowdown in consumer spending, particularly in non-foods.

The warning saw shares in the chain suffer their biggest loss in four years, dragging down other retail stocks amid fears of a spending slump.

Underlying sales at the group's UK stores chain were ahead by 4.7 per cent in the quarter to the end of May, but the figure fell short of analysts' expectations of about 5.5 per cent.

Further evidence that consumers are tightening their belts on the back of the recent interest-rate rises came earlier this week in a profit warning from Pendragon, the country's biggest car dealer.

Margins are taking a battering from fierce price competition, including a raft of incentives such as five-year interest-free credit deals. In an effort to maintain market share, the big car manufacturers are flooding the market with new models.

This has hit the far larger second-hand market (about three times the size of the new car market), as buyers take advantage of the deals and opt for new rather than used cars.

Pendragon reckons the step-up in competition is costing it about £50 for each vehicle it sells. It may not sound like much, but when you sell 300,000 vehicles a year, it adds up to £15 million wiped from profits.

Fiona Walsh writes for the Guardian newspaper in London