Tesco profit statement shows “significant progress”

Tesco chief executive Dave Lewis is set to make an "exciting" announcement on September 19
Outgoing Tesco CEO Dave Lewis will remain in the role until September

Dave Lewis, CEO of Tesco, has cited the company's latest profit statement as significant progress in the priorities he set out when he took the reigns at the company in late 2014

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13 April 2016 | 0

Tesco has posted its latest profit report, which it describes as showing “significant progress” in all three of its transformation priorities in Q4 of 2015. The main points of the report show a Q4 UK like-for-like sales growth of 0.9%, with a group like-for-like increase of 1.6%. The company has seen a reduction in indebtedness of £6.2bn, which includes the contribution made by the sale of Homeplus in Korea. Furthermore, the company says that its customer, colleague and supplier measures have all improved.

Understandably, the quarterly report pushes an optimistic, forward-thinking atmosphere at Tesco, citing an increase in UK customer satisfaction (5% year-on-year) and increased volumes (up 3.3% in UK Q4, up 5.5% internationally Q4), and increased profits (£944m operating profit before exceptional items).

The positive atmosphere has long since emanated down from CEO Dave Lewis, who took over the post in late 2014 at a particualrly tricky time for Tesco. On publication of the report, Lewis said that the company has made significant progress in the priorities set out in October 2014. “We have regained competitiveness in the UK with better service, a simpler range, record levels of availability and lower and more stable prices,” he said. “Our balance sheet is stronger and we are making progress in rebuilding trust in Tesco and our investment case.”

David Cheetham, analyst with XTB.com, told ShelfLife Tesco’s results are better than expected. “This shows further evidence that the decisive turnaround measures implements by Dave Lewis are starting to improve performance,” Cheetham said. “The 0.9% rise in like-for-like sales is the highlight of the report, and marks the first quarter of comparable sales growth in more than three years.

“A 30% rise in the share price year-to-date is supported by this robust set of earnings,” Cheetham said, “and several green shoots of recovery can be seen for the British retailer after a challenging few years. More work is clearly needed before investors can hope for a return to anywhere near the previous levels of stock price, but this morning’s report shows that the current strategy is beginning to bear fruit.

“Mr. Lewis’ ongoing attempts to streamline the business and dispose of unwanted segments indicate that the firm won’t be resting on its laurels as it strives to return to former glories,” he added.

 

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