Supermarket chain 'fixing fundamentals'
Tesco offers comfort as sales slide is better than forecast
Following a troubled 18 months during which it issued profit warnings, a record loss and an accounting scandal, it sales sales open for more than a year fell 1.3% over the 13 weeks to 30 May.
This compared with forecasts of a decline of up to 3%. The supermarket chain said this was because of lower prices, better product availability and improved customer service.
Chief executive Dave Lewis (pictured) said: “We set out to serve our customers a little better every day and the improvements we are making are starting to have an effect. We are fixing the fundamentals of shopping to win back customers and relying less on short-term couponing. Customers are experiencing better service, better availability and lower, more stable prices and are buying more things, more often, at Tesco.”
The trading update comes ahead of its annual shareholders’ meeting where shareholders may raised objections to a £1.2 million pound payoff to former chief executive Philip Clarke, who left in July.
John Ibbotson of the retail consultants, Retail Vision, said: “Turning the Tesco tanker around was never going to be easy, but Dave Lewis is definitely making inroads.
“It’s encouraging that Lewis has improved the key UK market despite the headwinds of deflation, discounters and an antiquated business model. This can only bode well for the future.
“Shareholders will be looking to the increased volumes and transactions and asking for more of the same.
“Lewis has grasped the nettle and is doing what needs to be done by streamlining the business, focusing on the core UK market and facing up to the pension deficit and property write-down.
“Structural issues still remain, specifically its portfolio of superstores weighing down on online and convenience, but Lewis is well aware of this.
“What we should also remember is that Tesco is still in the best position of the Big Four, with even now a market share of over 28%. The journey won’t be easy but if anyone is capable of re-establishing Tesco as the leading force within grocery, and the consumer champion, it is Lewis.
“By all means go after the golden goodbyes awarded to Clarke and McIlwee, but any investor complaints about Dave Lewis’ Golden Hello are likely to fade after these numbers. Slowly we’re seeing a smaller and leaner Tesco emerge, which is a sharp contrast to the arrogant behemoth of old.”