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Tesco reports on Q2 trading

Tesco Extra store

Tesco’s Chief Executive Dave Lewis, who earned the nickname ‘Drastic Dave’ after restructuring Unilever in 2007, has set the wheels in motion for Tesco’s turnaround following a tumultuous 2014.

Using today’s trading update, Lewis confirmed his game plan for the Big Four grocer, which centre around the closure its head office in Cheshunt and 43 unprofitable UK stores as well as press pause on the construction of 50 other stores.

The Big Four grocer said that like-for-like sales fell by just 0.3% during the six-weeks to January 3 and 2.9% for the 19 weeks to January 3. Compared with the 5.4% decline in the previous quarter, these results are a small victory for Tesco. It would seem that simplified product ranges, and the high profile price cuts of several staple Christmas foods in the “Festive Five” offer played well - leading to the first like-for-like growth in fresh food volume for five years.

Tesco has also confirmed that Matt Davies, Chief Executive at Halfords, has been poached to run the UK business and will start his new position in June.

John Ibbotson, Director of the retail consultants, Retail Vision, commented:

“Dave Lewis has grasped the nettle and done what needs to be done. Finally, we are witnessing the beginning of the Tesco fightback.

Tesco needed a completely new direction to thrive in the brave new world of retail and hang onto its market share. It now has one.

Lewis, it would seem, has bottle aplenty and he has taken some tough decisions. The next step is to communicate this robust plan clearly, to staff and shareholders alike, and then to implement it — rigorously and ruthlessly.

The journey won’t be easy but if anyone is capable of re-establishing itself as the leading force within grocery, and the consumer champion, it is Tesco.

Aldi and Lidl may finally have a fight on their hands.”

Lewis’ intentions, which also include closing Tesco’s defined benefit pension scheme, selling the analytics business behind Clubcard, scrapping the dividend payout to shareholders and cutting 30% of the retailer’s central costs, were met by investor cheers. Tesco’s share price rose more than 5% in early trading on FTSE.

See the full trading update here.

Source : Veebs Sabharwal - Retail Gazette

08 January 2015

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