Tesco back on track as shoppers splash out £980m a week
. . . but is boss ‘Drastic’ Dave Lewis off to Unilever?
TeSCO’S share price hit a threeyear high last night as the turnaround under chief executive Dave Lewis gathered pace.
in a sign Britain’s biggest supermarket chain has finally put the woes of recent years behind it, including an accounting scandal and a £6.4bn loss in 2015, it posted a 28pc rise in profits to £1.6bn.
Sales hit £51bn – or £980m a week – as Tesco attracted 260,000 new customers. it also reinstated its dividend after three years, promising 3p a share.
The results, the first since it completed the £3.7bn takeover of Booker five weeks ago, sent shares up more than 7.2pc, or 15.1p, to 225.4p, the highest level since May 2015.
‘Lewis deserves significant credit for getting things back on track after a very troubled period,’ said analyst Russ Mould, investment director at AJ Bell.
But the stellar results triggered fresh speculation that Lewis is being lined up for the top job at Marmite owner unilever, as Paul Polman prepares to step down by the end of the year.
Lewis, 53, who spent 27 years at unilever where he helped launch Dove in the uK, was widely viewed as being Polman’s protege before he jumped ship to Tesco in 2014. Lewis brushed off speculation that he was angling for the top job at unilever. ‘We’re very clear there’s more to do,’ said Lewis. ‘it’s definitely not job done. 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.’ Since joining in 2014, Lewis has battled to make Tesco popular with shoppers again after an accounting scandal saw the supermarket overstate its profits by £300m, wiping £2bn off its market value. nicknamed Drastic Dave for his ruthless cuts, Lewis has slashed management roles by 5,900 since 2014 but has added 18,443 staff to the shop floor.
He has also improved supplier relationships, rebranded Tesco’s own-label products, cut back on stocking unprofitable consumer electronics and increased pay for delivery drivers. it appears to have paid off, with customers returning to Tesco last year.
Bryan Roberts, global insights director at TCC Global, said: ‘Tesco has further underlined its recovery, demonstrating a creditable performance considering the dire situation in which David Lewis inherited the business.’
Laith Khalaf, analyst at Hargreaves Lansdown, added: ‘Tesco is enjoying a renaissance and its turnaround plan is literally paying dividends to shareholders.’
Following the merger with Booker, Tesco revealed it would keep Booker boss Charles Wilson on to head the new group’s uK and ireland operations, sparking rumours that Lewis was paving the way for Wilson to take over.
Tesco is expecting to make £2.5bn in extra sales as a result of the merger, while saving £200m.
Lewis did not give a timescale for the sales but said they would come ‘in the near-term’.
Tesco has already made use of the Booker link by opening ‘Chef Central’ outlets within supermarkets, to sell catering-sized produce like rice, oil and sugar to professional chefs. The stores are also open to the public. Lewis said he was very happy with the sales so far and was looking at extending the service.
He said Tesco is also looking at using its home delivery vans to deliver bulk supplies to restaurants. This could include selling and delivering products like chilled, pre-prepared mashed potato to cooks.
7.2pc
Rise in Tesco share price yesterday
£1.5bn
Increase in value of Tesco yesterday
£22bn
What Tesco is now worth
£51bn
Tesco sales last year
2.2pc
Rise in same store sales
£1.6bn
Profit last year
£6.4bn
Loss at Tesco in 2015
3p
Dividend per share paid to investors