Tesco says brand trust is ‘returning’ as it posts first quarterly sales growth in three years

Tesco saw like for like sales rise by 0.9% in its fourth quarter – its first quarterly sales growth for three years – as chief executive Dave Lewis said the supermarket is “succeeding” in rebuilding brand trust.

Tesco

The supermarket giant, which reported a £162m pre-tax profit for the year to the end of February, has seen overall customer satisfaction levels rise 5% over Lewis’ first full financial year in charge.

Tesco has also reduced its UK range by 18% while introducing 2,000 new lines. In order to steal customers from the discounters and price-led rivals such as Asda, it reduced prices by 3% over the 12-month period.

Lewis said these achievements have all been contributing factors as Tesco “consolidated more shopping missions into one”.

Speaking on a press call this morning (13 April), he said: “I set out three tasks – regaining competitiveness, rebuilding trust and gaining greater transparency in areas such as price – and we’re succeeding on all three fronts.”

Just a year ago, Tesco posted a record loss of £6.33bn, one of the biggest in UK corporate history, but Lewis claimed it is now a very different business. “We’re consolidating more shopping missions into one and time-starved customers are looking at Tesco as a convenient option once again. I would say we’ve now stabilised the business.”

Defending its new farm brands

Last month, Tesco announced an own-label rebrand with the creation of seven new brands featuring the names of fictional farms across its entry-level fresh food.

The branding has been criticised by some for using the name of farms to create an untruthful premium feel to what are essentially value products. However, Lewis said the British consumer understood the changes.

“I have been around long enough to know marketing will always attract discussion and comment. The thing one must always do is focus on customers and we have been clear with them that we create brands here and launch brands here,” said Lewis, who added that the new Farm Foods range would cut prices by up to 20% on an average weekly shopping basket.

“The British customer is much more savvy about marketing than most people give them credit for.”

Dave Lewis, Tesco CEO

“What they say to me when we’ve developed these is do they come from farms? The answer is obviously yes. Do they also know one farm cannot possibly satisfy all the demand for Tesco? They absolutely get it. Do they understand what we do in terms of branding is pick a name for the farms brand and then we set a quality specification that becomes consistent and matches with the value equation? They get it. That is what a brand is. Customers get it. While there has been negative comment [from some analysts] more than 95% of the comments we’ve received from customers were appreciative.”

Confidence in price matching

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Tesco made particular waves over the six-week Christmas period, where sales rose by 1.3%. That was a stark contrast to festive declines at the likes of Asda. It also said it had improved service by adding 9,000 “customer-facing” roles.

Big four rival Sainsbury’s recently announced plans to drop its Brand Match voucher scheme as it looks to simplify its pricing model. But despite the move, Lewis insisted that there is still a hunger for price comparison schemes.

He concluded: “There is still an appetite for Brand Guarantee. It is unique as you don’t walk out the shop paying more for a branded product. Customers are starved of time and transparency over price is a bit factor in where they choose to shop.”

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