Tesco’s £3.7bn Booker prize is ‘compelling’
TESCO boss Dave Lewis yesterday defended its “compelling” £3.7billion takeover of wholesaler Booker after the supermarket’s turnaround gathered pace with its first growth in UK sales for seven years.
The retail giant is struggling to convince some leading shareholders such as Schroders and Artisan Partners that it is not overpaying for the cash-and-carry firm to create Britain’s biggest food company. But Lewis, who as chief executive has led Tesco’s recovery from a record £6.4billion loss two years ago, insisted the acquisition was no greater distraction to management than its dealing with an accounting scandal and a major asset disposal programme, and would deliver significant savings.
He said: “It is a unique way to unlock that opportunity to give customers better choice, value and service. It is a big, exciting and compelling opportunity.”
Lewis said Tesco’s results, showing a 30 per cent increase in annual operating profit before exceptional items to £1.28billion on 4.3 per cent higher sales of £49.9billion, were ahead of schedule.
UK same-store sales improved by 0.9 per cent, the first annual growth since 2009/10, with food takings up 1.3 per cent. Pre-tax profit fell 28.2 per cent as Tesco took a £235million exceptional charge relating to its agreement with the Serious Fraud Office and the Financial Conduct Authority, while its debt was reduced by 27 per cent to £3.7billion.
Lewis said: “Today, our prices are lower, our range is simpler, and our service and availability have never been better. We have increased profits, generated more cash and significantly reduced debt. We are ahead of where we expected to be and are confident we can build on this performance in the year ahead.” Phil Dorrell, partner at Retail Remedy consultants, warned Tesco must be careful not to risk falling store standards and availability by cutting costs too deeply.
But he added: “The multi-pronged strategy adopted by Lewis is working on all counts and just needs the Booker deal for a full house. Far from being a distraction to the UK core business, it would be beneficial. Pulling the plug on the Booker deal could be more distracting.”