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Tesco’s Drastic Dave must keep delivering to revive fortunes of the supermarket giant

Tracey Boles
Customers leave a Tesco supermarket in w
Tesco is starting to win back shoppers from discounters Lidl and Aldi (Source: Getty)

Tesco's slogan “every little helps” was aimed at cost-conscious shoppers in the financial crisis, but the same could also be said of the grocer’s gradual recovery under CEO Dave Lewis.

Two years into his tenure, the retailer can perhaps add a new catchline to its roster: buy everything here.

Lewis is steering the Tesco juggernaut around with a “volume-based recovery”: sales to you and me. His recent product launches have gone down well, with the cheaper Farm brands range now finding its way into over a quarter of the grocer's baskets. And the signs are that Tesco is starting to win back shoppers from discounters Lidl and Aldi.

According to figures from Kantar, sales fell by 0.2 per cent to £6.96bn in the 12 weeks to 11 September, the slowest rate of decline for seven months. The sales slide stretching back to March 2015 could soon end. As well as the revitalised own-label ranges and a pricing strategy that is challenging the discounters, Tesco’s recovery has been attributed to engaged store managers, and improved supplier relationships.

Read more: Pension pain at Tesco despite expected profit rise

Today, investors will get fresh insight into how Britain’s biggest supermarket chain is performing under the man dubbed Drastic Dave when the grocer reports interim results. Analysts are forecasting a third straight quarter of UK sales growth year-on-year.

The ballooning pension deficit could hog some headlines but until the next triennial valuation in 2018, it is largely a distraction. So, perhaps, is the accounting irregularities scandal which pre-dates Lewis but is reaching denouement under his watch.

A trio of former Tesco directors will appear in court later this month on fraud charges relating to the scandal. All have pleaded not guilty. Instead, the City will focus today on UK profit margin, and any sign of factors that influence it, such as investment, or price cuts.

Read more: Now Tesco's doing same-day click and collect in battle with Amazon

When the investment in Farm brands was revealed last spring, Tesco’s share price dropped. It has largely recovered since then, closing yesterday at 188.8p, relatively near its year-to-date high of 201p and significantly above January’s opening of 149p. As momentum builds behind the grocer, Lewis needs to keep delivering, little by little. Next up on the conveyor belt, a resumption of the dividend.

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