Tesco turnaround continues as profits surge

A change in approach from Tesco seems to be paying off for the grocery giant, according to Danielle Pinnington, Managing Director at Shoppercentric. “A strong Christmas showed how far things had turned around, and the more confident approach to advertising and communication continues to demonstrate a return to what they are best at,” she added.

Pinnington made her comments as Tesco reported pre-tax profits of £1.3 billion for the year to 24th February, up from £145 million for the previous year as UK sales rose 2.2%. “This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value,” said Dave Lewis, Chief Executive.

“We have further improved profitability, with Group operating margin reaching 3% in the second half. We are generating significant levels of cash and net debt is down by almost £6 billion over the last three years.  All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco. I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business.”

There have, however, been slip ups along the way that have kept social media busy. Proposed changes to Clubcard were not well received by loyal shoppers, nor was the meal deal shrinkflation which hit stores in the past week. “So they need to be mindful that shoppers have so many easily accessible alternatives to Tesco. The business needs to cast a shopper perspective over all their plans, to make sure they don’t lose touch and alienate the very people making such a difference to their bottomline,” said Pinnington.

Overall, though, Tesco has its confidence back and is behaving once again like a market leader. “From the shoppers’ perspective stores are looking better, innovative products are hitting the shelves and the retailer’s price position is sharper,” commented Alastair Lockhart, Insight Director at Savvy. “What we’re looking for now is further clarity on its plans for Booker as this is set to form the foundation for Tesco’s development over the next few years. It will be interesting to see how its technology and processes can benefit Booker customers and symbol operators. And, perhaps more importantly, the merger gives Tesco access to the food services market, and therefore a new platform for growth.”