Tesco on track for ‘turnaround’ as sales and profits rise

By James Ridler contact

- Last updated on GMT

Tesco has posted rising sales and profit, signalling a turnaround for the supermarket chain
Tesco has posted rising sales and profit, signalling a turnaround for the supermarket chain

Related tags: Tesco, Customer service, Retailing

Tesco’s turnaround is firmly on track, according to chief executive Dave Lewis, as the UK’s largest retailer reported rising sales for the seventh quarter in a row.

Group sales were up 3.3% to £25.2bn for the 26 weeks ending August 26 2017, while UK like-for-like sales – excluding sales from stores opened in the past year – grew by 2.2%.

Operating profit before exceptional items in the UK and the republic of Ireland was up 21.1% to £471M. Tesco’s group profit had risen by 27.3% to £759M.

Commenting on the results, Lewis said: “We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago.

‘Our offer is more competitive’

“All of this is possible because of the focus we have placed on serving shoppers a little better every day. Our offer is more competitive and more customers are shopping at Tesco.”

In June, Tesco said it was working with its suppliers to keep its prices low for customers.

Tesco will also pay a dividend for the first time in three years. The last time was in the 2014–15 financial year, before the retailer admitted it had overstated its profits by about £250M.

The supermarket group will pay a dividend of 1p per share and expected to pay a larger final dividend of about 2p per share.

‘Build on our strong performance’

Lewis added: “Today’s announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders.”

Meanwhile, business consultancy Money.co.uk analyst Martin Lane said the results showed Tesco was recovering from the accounting scandal and regaining its customers’ trust.

However, the supermarket still faced strong competition from discount retailers Aldi and Lidl. Read Lane’s full comment in the box below.

What the analyst said – Money.co.uk

Martin Lane, analyst at business consultancy Money.co.uk. said that Tesco’s results proved consumer confidence in the supermarket was growing, but the retailer faced stiff competition from discount retailers.

“Tesco is still faced with fierce competition from the likes of Aldi and Lidl, but it’s fighting back. They seem to be finally recovering from their accounting scandal and slowly regaining the trust of their customers.

“Their focus on improving customer service and keeping prices competitive despite rising inflation seem to have paid off in terms of customer loyalty and it’s getting us coming back for more.”

Lane also suggested Tesco’s “slim lining” ​of its operations, including the disposal of fringe businesses Giraffe and Dobbie’s, had reflected positively of its results.

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