The troubled retail giant revealed UK like-for-like sales fell by 1.1% in the second quarter, while international sales rose by 1%.
But pre-tax profit reached £74M, after a loss of £19M in the first half of last year.
Tesco claimed it was on track to deliver £400M of annual cost savings from the group restructuring investment. Significant progress was said to have been made on balance sheet priority, with sale of Homeplus in Korea and confirmation of move to defined UK contribution pension scheme.
The retailer said it was retaining its focus in the UK on service, availability and cutting prices, which saw transactions rise by 1.5% and volumes rise by 1.4% in the first half.
‘Unprecedented level of change’
Chief executive Dave Lewis said the retailer had delivered “an unprecedented level of change” over the past 12 months, which was helping to revive the flagging fortunes of Britain’s biggest retailer. “The first half results show sustained improvement across a broad range of key indicators,” said Lewis.
“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.”
Business recovery and property services consultancy Begbies Traynor said a year after Tesco’s £250M overstatement scandal the group was still struggling to recover.
“With a Serious Fraud Office investigation still casting its shadow, the unrelenting pressure on margins that discounters Aldi and Lidl continue to exert combined with the additional costs it faces from the National Living Wage, the group’s turnaround project still has a long journey ahead,” said Begbies Traynor partner Julie Palmer.
Tesco faced with “the uncertain task” of both improving flat sales growth and winning back investor’s trust. “Disposals, store closures and cost cutting will only do so much for the beleaguered supermarket giant, and market insiders will now be questioning whether ‘Drastic Dave’ has been truly drastic enough.”
Loss of £6.4bn
In April Tesco posted a pre-tax loss of £6.4bn in full-year results to February; the worst financial result in its history.
Meanwhile, yesterday (October 6) revealed plans to standardise payment terms, as part of moves to simplify its relationship with UK suppliers and build new trust.
Its existing complex payment terms will be replaced by a standard approach including shorter payment times for small and medium businesses.
Tesco suppliers who deliver products worth up to £100,000 a year will be paid within 14 days, as part of the new payment plans to be introduced by end of June 2016.
Has 'Drastic Dave' been drastic enough?
“Disposals, store closures and cost cutting will only do so much for the beleaguered supermarket giant, and market insiders will now be questioning whether ‘Drastic Dave’ has been truly drastic enough.”
- Julie Palmer, Begbies Traynor