Tesco says turnaround will be on track as sales rise again

Tesco bagsImage copyright
Getty Images

Tesco chief executive Dave Lewis has said the supermarket’s turnaround will be “very firmly on track” as sales rose for the seventh quarter in a row.

Like-for-like sales, which exclude completely new store openings, rose 2.1% within the second quarter, just short of City forecasts.

Pre-tax profit was also up, rising to £562m for the first half compared with £71m for the same period last year.

Tesco said This particular would likely pay a dividend for initially in three years, which This particular said reflected “board confidence”.

The last time Tesco paid a dividend was within the 2014-15 financial year, just before the supermarket group shocked the market in admitting This particular had overstated profits by about £250m.

The UK’s largest supermarket chain will pay an interim dividend of 1p per share, in addition to also said This particular expects to pay a larger final dividend of around 2p per share.

“Sales are up, profits are up, cash generation continues to strengthen in addition to also net debt levels are less than half what they were when we started out our turnaround three years ago,” Mr Lewis said.

Tesco’s shares rose initially after the results, yet quickly fell to trade almost 2% lower.

Hargreaves Lansdown analyst Laith Khalaf said the fall was due to the supermarket’s sales growth slowing slightly by the first quarter, when like-for-like sales rose 2.2%.

“In any set of company results, there are always negatives the market can dwell on, in addition to also which applies in spades for a company like Tesco, which will be within the process of recovering to full health,” he added.

Image copyright
Getty Images

Image caption

Tesco will be awaiting the results of an in-depth competition inquiry into its proposed £3.7bn takeover of wholesale giant Booker

Analysis: Simon Jack, BBC business editor

This particular was almost three years ago when Dave Lewis gave me his first broadcast interview.

This particular was to announce a £250m black hole in Tesco’s accounts.

Sales had been falling off a cliff in addition to also the company went on to report the biggest loss in UK retail history.

How things have changed.

Sales in addition to also margins are right now growing, its market share has stabilised by the onslaught of the discounters in addition to also, in an important show of confidence, Tesco has started out paying a token dividend again.

This particular’s not been pain-free. Thousands of jobs in stores in addition to also offices have been cut by “drastic” Dave Lewis.

This particular will probably never enjoy the profitability This particular had 10 years ago. The competition will be very different right now in addition to also when you have a market share of 28%, growth will be hard to come by.

not bad retailers know which smugness will be a dangerous quality, yet Mr Lewis will be looking forward to Christmas a lot more than he was three years ago.

within the UK, Tesco said which fresh food in particular had performed well within the six months to 26 August, with sales up 1.5%, in addition to also was right now in 70% of customers’ baskets.

The supermarket has come under fire in recent days after alleged food safety breaches at one of its chicken suppliers, 2 Sisters.

Mr Lewis said which he was “as shocked as anybody” when the reports emerged, yet said This particular would likely continue to use the supplier.

He said which Tesco executives in addition to also food safety officials visited the plant on Friday in addition to also did not find any issues.

The plant has suspended operations while This particular retrains staff.

Image copyright

Image caption

Dave Lewis said Tesco would likely continue to use 2 Sisters as a chicken supplier

Tesco’s fresh food in addition to also farm brands labels have been credited with helping This particular to compete with discount rivals Lidl in addition to also Aldi.

The supermarket said which despite “challenging” market conditions, This particular had “worked hard with our supplier partners to minimise cost increases for customers”.

This particular said This particular was helping This particular to become “even more competitive”.

The UK’s inflation rate will be currently at its highest level in a few years at 2.9%.

The supermarket has been battling to recover by its 2014 profit scandal, rising costs as well as continuing competition by the German discounters.

Sanford Bernstein analyst Bruno Monteyne said the results showed which Tesco was recovering within the UK, while its troubled international operations were also improving.

“Total scorecard: Dave Lewis will be truly delivering,” he told the BBC’s Today programme.

Although the restored dividend will be modest, he said This particular sent an important signal in addition to also was a “sign of confidence” by management about Tesco’s prospects.

Booker deal

The results come as Tesco will be awaiting the results of an in-depth competition inquiry into its proposed £3.7bn takeover of wholesale giant Booker.

The Competition in addition to also Markets Authority (CMA) will be required to report its provisional findings next month, that has a final decision due in December.

The CMA has said there are 350 areas where there will be an overlap between Tesco shops in addition to also Booker-supplied independent stores.

Source link

Leave a Reply