Tesco Delivers a Dividend from Sales Growth and Cost Reduction

John Ibbotson

John Ibbotson / 4th October 2017

‘Drastic Dave’s’ turnaround of Tesco is now clear for all to see, he has increase margins in a tough economic environment. Keeping prices low and offering good customer service have seen customers return from the discount retailers.

“The giant has woken from its slumber – and then some.

“Tesco’s surging profits are a huge achievement and a shot across the bows to the brand’s would-be obituary writers.

“The timing couldn’t have been more striking too. As the trial begins of three former senior executives accused of cooking the books during Tesco’s bad old days, this barnstorming result shows how far the turnaround has come.

“After seven consecutive improvements in like-for-like sales, Tesco has finally reinstated the shareholder dividend in the clearest sign yet that the rot has been stopped.

“Dave Lewis has lived up to his ‘Drastic’ nickname and achieved the delicate balancing act of increasing margins while barely raising prices.

“In the current inflationary environment this is a huge feat – and one of the key reasons cash-strapped customers have been returning to the retail giant in large numbers.

“The secret of his success has been to work with fewer suppliers and then use Tesco’s formidable buying power to drive down their prices.

“The combination of cheaper supplier costs and a gradual reduction of Tesco’s own operating costs have allowed the brand to increase profits in the face of a weakening market and intense competition.

“It’s back to basics stuff – sticking religiously to delivering a strong food proposition, keeping prices low and improving customer service – but it works.”

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