Tesco targets £2.5bn growth
TESCO shares hit a three-year high as it set out plans to boost sales by an extra £2.5billion following its takeover of wholesaler Booker Group.
The UK’s biggest supermarket expects to save at least £200million a year within three years of its £3.7billion acquisition of the cash-and-carry firm, which was completed five weeks ago.
Growth will come from Booker, whose brands include Londis, Budgens and Premier, selling Tesco goods and vice-versa, expanded delivery options and new store formats including Booker’s Chef Central catering supply business in its stores.
It marks the latest chapter in Tesco’s turnaround under chief executive Dave Lewis, which delivered a 28.4 per cent rise in annual underlying operating profit to £1.64billion.
Lewis, pictured, who took over in 2014 just before Tesco shocked investors by announcing a £250million black hole in its accounts, has now overseen nine consecutive quarters of like-for-like sales growth, attracting 260,000 more shoppers over the past year. Group sales were up 2.3 per cent to £51billion.
He highlighted a strong fresh food performance after a big investment in farm brands as UK food sales increased by 2.9 per cent, partially offset by a 0.4 per cent drop in general merchandise as it stopped competing in some markets such as electricals. Clothing sales were up by 2.6 per cent.
Tesco has increased the number of “customer-facing” staff by 18,000 in recent months, while reducing management roles by 5,900. Lewis also pointed to improved relations with suppliers.
He said: “With three years under our belt Tesco is growing again, recovering profitability and generating significant cash. The merger with Booker allows us to build on this trajectory.
“More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value. It’s definitely not job yet done. We’re very clear that there’s more to do.”
Tesco has reduced its debt from £21billion in 2014 to £12billion and will pay a final dividend of 2p a share for a total of 3p. Its half-year payout was its first in three years. Shares rose 15p to 225½p. Laith Khalaf, senior analyst at investment firm, Hargreaves Lansdown, said: “Tesco is enjoying a renaissance and its turnaround plan is literally paying dividends to shareholders.”