Tesco's turnaround: Retailer post quarterly growth

By Erin Smith

Published: 13 April, 2016

Multiple retailer Tesco posted its first quarterly sales growth in nearly three years signalling that the supermarket giant's turnaround is gathering momentum.

"We have made significant progress against the priorities we set out in October 2014. We have regained competitiveness in the UK with significantly better service, a simpler range, record levels of availability and lower and more stable prices. Our balance sheet is stronger and we are making good progress in rebuilding trust in Tesco and our investment case," said chief executive, Dave Lewis.

Tesco Dave Lewis Tesco Dave LewisTesco Dave Lewis

UK's like-for-like sales growth was up 0.9%. Volumes of sales were up 3.3% for the fourth quarter, while UK transactions increased 2.8%. Tesco's full year operating profit for the 2015/2016 year was £944 million, beating analysts expectations of £932 million for the year.

Martin Lane, a representative from www.money.co.uk, said: "After a disastrous year, the leader of the pack is finally rewarded for drastically shaking up their business model. Not only have Tesco reduced store numbers and cut back on stores opening for 24 hours, they have also followed in the footsteps of Lidl and Aldi by reducing the number of different products they offer."

According to the Tesco Preliminary results report for 2015/2016, the company "reviewed every one of our 33 food categories, reducing the number of products by 18%, lowering the price of an average weekly shop by over 3% in the last year, whilst introducing 2,000 new lines."

Tesco Dave Lewis

The company also was able to cut costs through the closure of 60 unprofitable stores and a UK management restructure, which reduced 25% of the roles in the office.

The company also sighted that it "generated annual positive volume growth for the first time in five years, supporting efforts to build long-term, mutually-beneficial relationships with suppliers."

Earlier this year Tesco had been sighted by the Grocery Adjudicator Code for being in serious breach of the Code to protect groceries suppliers for activities that happened between 2013- 2015.

For Lane it was not just the cost cutting that has helped turn the retailer around- it was Tesco listening to its customers that has served it so well.

He said: "Although this must have all helped their margins, I believe the number one reason they are now profitable again is because they listened to their customers and lowered their prices. The key ingredient Tesco can boast over its discount competitors is hands down better customer service. If Tesco can get close to the prices the budget supermarkets offer, shoppers will return because the customer experience is superior."

Printer friendly version