Tesco's share price climbed 3.6 per cent this morning as investors digested what appear to be the first signs of a turnaround under new chief executive Dave Lewis. The troubled supermarket has reported its smallest declines in more than a year, while volumes are up.
Tesco has stemmed its declines – group like-for-likes (excluding fuel) were down 1.3 per cent for the 13 weeks to 30th May, while volumes rose 1.4 per cent.
That's significantly better than analyst expectations, which had the decline at anywhere between 1.6 per cent and three per cent.
In the UK and Ireland, the decline was 1.5 per cent but this was still an improvement on previous quarters, which Tesco management put down to “the investments we are making across our offer”.
There are 180,000 more customers shopping at the supermarket than last period.
International performance has also improved, with a decline of one per cent, compared with 1.7 per cent the same time last year.
Total group sales dropped by 0.5 per cent.
Why it's interesting:
What a difference a year can make. Instead of issuing a profit warning, the company is actually beating (admittedly low) expectations...
As well as the well documented problems with Tesco's balance sheet, the supermarket has been under huge pressure to compete with the new kids on the block Aldi and Lidl, which are forcing the established grocers to cut prices.
Tesco – and the rest of the big four – has been failing to keep up. But today's figures suggest that a turnround could be in the post.
Lewis has been keeping busy – not only is he addressing the pricing strategy, he is also selling off some of Tesco's assets, shutting unprofitable stores, and overseeing several changes in the top team.
However there could be sparks flying over his salary (and Philip Clarke's golden goodbye) at today's AGM.
What they said:
The company was confident about the work it had done to get things back on track.
Lewis said: "We set out to serve our customers a little better every day and the improvements we are making are starting to have an effect.
“We are fixing the fundamentals of shopping to win back customers and relying less on short-term couponing. Customers are experiencing better service, better availability and lower, more stable prices and are buying more things, more often, at Tesco.
“These improvements have come during the restructuring of our office and store management teams, which testifies to the focus, skill and commitment of colleagues across the business. We have also seen an improved performance in our international markets, as we continue to focus on serving customers better.
“Whilst the market is still challenging and volatility is likely to remain a feature of short-term performance, these first quarter results represent another step in the right direction."
Tesco is not out of the woods yet but Lewis is clearly making in-roads. As we all know by now, every little helps