Tesco's share price has recovered this year as Dave Lewis implements his turnaround plan, but the preliminary results could affect sentiment

 
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When Dave Lewis took over as Tesco chief executive in September 2014, much was made of his nickname Drastic Dave, particularly as drastic measures were necessary to revive the group's flagging fortunes.

Lewis was parachuted in from Unilever to turn around the Tesco juggernaut after a scandal that had seen the retailer overstate its profits.

Update: Tesco's results are out - and here's what the market is making of them

And in April last year, the company reported a record pre-tax loss of £6.4bn for the year to February, largely thanks to a substantial property writedown. This marked the biggest loss reported to date by a British retailer. Since that inauspicious start, Lewis's management performance has been notable for its steady progress – more "every little helps" than a radical overhaul.

Tesco set out early into the current financial year with three main aims: regain UK competitiveness, protect and bolster the balance sheet and rebuild trust and transparency. In September, Tesco sold its South Korean business, Homeplus, for £4.2bn so it could concentrate on turning around its UK supermarket business. Much-needed changes to the pension scheme soon followed.

Yesterday, Tesco fired the starting gun on a long-mooted sell-off of non-core assets, with the sale of some of its stake in Asian online business Lazada to Chinese internet giant Alibaba for $129m (£90.6m). The retailer is reportedly planning to sell off some of its side businesses, including Dobbies Garden Centres chain, coffee shop chain Harris & Hoole and restaurant chain Giraffe.

Big disposals done, the watchwords going forward are simplification, price and service.

But first up is today's preliminary results for 2015/2016. The supermarket giant is expected to report a return to sales growth in the fourth quarter.

Some analyst sentiment is positive with Bernstein expecting Lewis “once again to overdeliver”. But others remain sceptical. JP Morgan said in a note: “We acknowledge Tesco’s solid management skills and that progress been made in a transition year but conclude that there is some disconnect between the positive sentiment surrounding the stock and its valuation, particularly in the context of expectations that are high.”

The real measure of success will be the share price reaction. The stock has climbed from 139p in early January to within touching distance of the 200p mark at yesterday's close, prompting many conversations in the City about a recovery. Investors are hoping it's not all talk.

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