Lewis insists Tesco is making ‘lots of progress’ in brand rebuild as profits tumble
Tesco chief executive Dave Lewis insisted today (October 7th) that the struggling supermarket giant was making ‘lots of progress’ as it rebuilds its brand through ‘better behaviour’ towards both customers and suppliers.
His claim comes as Tesco reported underlying profits of £354 million for the first half of its current financial year; a staggering 55% fall from the same period last year when the figure stood at £779m.
Although like for like sales were down 1.1% for period, this was an improvement on a 2% fall in the fourth quarter and a 4% drop for the same period last year. It was also marginally better than analysts’ estimates, with the City expecting a steeper 1.5% slump in LFL sales.
Its pre-tax profit, meanwhile, was £74m, compared with a loss of £19m for the same period a year ago.
“We have delivered an unprecedented level of change in our business over the last twelve months and it is working,” insisted Lewis.
Lewis believes the supermarket’s investment in improving supplier relations – of which it announced changes yesterday that will see its smallest suppliers receive payments within 14 days, rather than the industry standard of 28 – and bettering the in-store experience were helping to rebuild trust in the Tesco brand.
Rebuilding trust
Over the last 12 months, Tesco’s brand perception has been rocked by a high-profile accounting scandal, in which it overstated its profits by £263m while in February it reported a record £6.4bn loss; one of the biggest in British corporate history.
However Lewis hit back today: “When it comes to regaining trust in the brand, I see lots of progress. The way we treat our suppliers has a huge impact on brand trust and the changes we’re making in that department are fantastic.
“The way our colleagues are changing the in-store experience is also rebuilding trust and unparalleled engagement levels. I think you earn trust through good behavior and our colleagues are behaving amazingly. There is still work to do in rebuilding trust but we’re now much more competitive.”
To win back customers lost to the German discounters Aldi and Lidl, Lewis has been focusing on cutting prices and putting more staff on the shop floor.
International plans
International sales were up 1% for Tesco during the half year period and Lewis said there were no longer plans to offload its retail operations in eastern Europe or Thailand. Tesco has also decided not to sell its loyalty card data business Dunnhumby.
“We will stay focused on generating better returns from the assets we’ve got,” added Lewis.
Retail Remedy analyst Phil Dorrell believes Tesco is now “over the worst.”
“Today shows Tesco is ready to move from intensive care into the recovery ward. Although it isn’t cured, it is definitely over the worst,” he said.
