John Ibbotson / 12th April 2017
Tesco’s fairy-tale recovery story continues and at a time of cut-throat competition, it is all the more impressive. Dave Lewis’s “ back to basics approach” is still paying off.
“In his relatively short tenure, Dave Lewis has turned a thoroughly demoralised business into one with a clear sense of direction.
“The core UK market is starting to fire on all cylinders, debt is down significantly and the group performance has been marred only by weakness abroad, especially in Thailand.
“But there’s a long way to go yet, especially with inflation likely to rise further and competition in the core UK market extreme.
“Remember that the old Tesco made profits of £3.8 billion in 2011, a peak it may never again scale. Tesco is on the right track but sustainable improved profitability is not guaranteed.
“The Booker deal, if it goes ahead, could prove decisive. It will help Tesco to keep costs and prices down for longer than its rivals, increase its margins, gain more exposure to the growing ‘out-of-home’ food market and grow all-important market share. The Booker deal is all about short-term pain for long-term gain.
“Dave Lewis has achieved this turnaround by returning the company to the basics of retail: pricing to match the UK discounters, new and simplified product ranges, better customer service and regained customer trust in Tesco. He has also improved the relationship with suppliers and that’s no small achievement.
“Strengthening the balance sheet by selling off non-core operations, closing underperforming stores and writing down the property portfolio have all started to make an impact on profitability.”