Tesco’s trading and divi both have a restored look about them

Comment Martin Flanagan

It may not be Mission Accomplished yet, but nobody can just talk about a “nascent” recovery at Tesco any more.

Seven consecutive quarters of rising likefor-like sales. A restored dividend after a three-year hiatus. Strong profit growth and a reduced pension deficit. And a clear simplification of the business. There has clearly been some employee pain under Tesco chief executive Dave Lewis. He closed the group’s HQ in Cheshunt, moved a lot of staff to a new HQ in Welwyn Garden City, and then “de-layered” admin workers there by about 1,200. A similar amount went at a call centre.

But on the trading front Tesco looks a brand revitalised, and much better placed now to combat the market share plunderings of discounters Aldi and Lidl.

The 1p divi is token in amount, but a significant emblem of a milestone to recovery. Strategy for show, dividends for dough, as some investor greybeards say.

Lewis – sometimes called “Drastic Dave” – says the restored divi is meant to show how confident Tesco’s management is again about its cash-generation prowess.

And that’s how the City will see it on reflection, even if the shares slipped a few per cent yesterday, a mixture of some profit-taking on recent gains and a little disappointment with the slight falloff in same-floorspace sales growth between the first and second trading quarters.

The rot at Tesco, which gathered pace under Lewis’s predecessor Phil Clarke up to the accounting scandal in 2014, seems to have stopped.

Food retailing industry gurus say the layouts of the stores are crisper and clearer and there seem more staff on the shopfloor. One component of Lewis’s recovery plan for the group seems to have been to realise it would be foolhardy just to get hung up on areas like suppliers, IT systems and the sale of non-core assets.

He seems to have decided that repairing the bottom line was priority one, and that the customer offering in the stores needed to be refreshed to deliver that.

Lewis is obviously staking quite a lot on the strategic move to buy Booker, the wholesaling and convenience store chain. But yesterday’s strong interim figures suggest he is operating from a position of regained trading strength at Tesco, always nice when contemplating a major corporate move.