More Tescwoes? Crucial spell ahead for Drastic Dave's turnaround plan

 
Shruti Tripathi Chopra
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Customers leave a Tesco supermarket in w
Tesco remains Britain’s biggest supermarket chain with a 27.8 per cent market share (Source: Getty)

All eyes were on Lidl this week when the German discounter pushed its trolley ahead of Waitrose to become the UK’s seventh-largest supermarket. But what about the original giant, Tesco?

Latest figures from Kantar Worldpanel showed Tesco enjoying a 3.2 per cent increase in cash sales for the 12 weeks to mid-August. This pushed the grocer’s shares to a two-month high on Tuesday. It remains Britain’s biggest supermarket chain with a 27.8 per cent market share, albeit down from the near-32 per cent peak a decade ago.

The company yesterday opened an £85m compensation scheme for around 10,000 investors who lost money after being misled by the company’s £263m profit overstatement three years ago. It came after the grocery giant agreed to pay a £129m fine to the Serious Fraud Office to avoid prosecution for its accounting bungle.

Read more: Tesco hands payouts to 10,000 shareholders over its 2014 accounting scandal

Tesco boss Dave Lewis will hope the measures go some way to putting the scandal in the past. To some extent, every little has indeed helped Tesco this year as it tries to move on. "Drastic Dave" has lived up to his nickname by slashing thousands of jobs since he took the helm. Some analysts say his savings drive could allow Tesco to restore its dividend this year after a two-year absence.

But Lewis still has his work cut out, and not just thanks to discounters and their ever-increasing market share. The Competition and Markets Authority (CMA) is conducting an in-depth probe into the supermarket chain’s £3.7bn purchase of wholesaler Booker, announced in January this year.

If the regulator believes competition is affected, it could force Tesco to offload stores or block the deal altogether. Moreover, some of the company's biggest shareholders remain opposed to the merger, with one branding the deal a “distraction for management”.

The final report of the CMA’s investigation will be revealed in December. While Lewis will be hoping for a merry Christmas, the probe has the power to obstruct the deal and severely dent his vision for a bigger and better Tesco.

Read more: Hot weather and inflation give supermarket sector summer boost

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