Tesco posted its third consecutive quarter of sales growth under chief executive Dave Lewis, who said today (5 October) during a press briefing Tesco is a brand that has “moved out of crisis”.
Like-for-like sales were up 0.6% in the first half of its financial year to 26 August. And although Tesco reported a group pre-tax profit of £71m – down 28% on the same period last year – Lewis said a plan to slash costs by £1.5bn over the next three years to invest back into its customer offering would help get profitability “back on track”.
Lewis also claimed brand health had returned to the highest level in more than four years and that Tesco was now the most improved retailer in terms of customer recommendations.
The role of marketing
When asked by Marketing Week how big a role its TV advertising by BBH has played in this process, Lewis responded: “In terms of [TV] advertising, we have some very encouraging signs in terms of how it is contributing, but there is also clearly still lots of opportunity to improve, so we don’t think it is done yet.
“If you were to look just at our TV advertising and not to spend time looking at all the other ways we’ve engaged with customers, particularly over the last 12 to 18 months, then you might miss some of the totality of the marketing mix.”
He saved particular praise for Tesco’s social media efforts, adding: “If you look at some of the things on social and direct, we’ve done things in a very much more customised way. We have very much put our money into a more personalised way of communication. It is something people don’t always see as it is more targeted to the groups of customers we are trying to impact.
“At an advertising brand health comms level, I am seeing some strong signs that what we are doing is actually resonating with customers. But that’s not withstanding the fact we can still improve.”
Dave Lewis, CEO, Tesco
Managing fallout from the fraud investigation
Tesco is facing an ongoing criminal investigation after three executives were charged by the Serious Fraud Office for their role in overstating business profits by £263m back in October 2014.
Separately, the company is also facing legal action from a group of shareholders who claim to have lost £150m as a result of the accounting scandal.
And Lewis admitted these issues could have a negative impact on the positive progress he has made in rebuilding trust in the overall Tesco brand.
He told Marketing Week: “Our brand health is at its highest level in four years. The gap between us and our principal competitors has narrowed considerably and it gives you a real indication of our current momentum.
“But as the business deals with historical issues [before my time as CEO], the opportunity for that to come and be a difficult story for Tesco exists.
“The last two years has shown me people judge a brand more on their personal experience in-store and any way it connects with the business as opposed to, with respect, whether they read about something that isn’t as connected to them elsewhere,” he added.
“I don’t know what the future will hold in that sense but the fact is we have rebuilt engagement with the brand at a time where the accounting issue has clearly been alive.“
Farm brands continue to shine
Elsewhere, Lewis said the supermarket giant’s controversial farm brands were continuing to contribute to growth, with 80% of Tesco customers now making repeat purchases of the value range.
He also claimed that its larger Extra stores had been in “slightly positive growth” over the last three quarters.
Lewis explained: “Around two-and-a-half years ago our biggest store estate was in a 7.5% decline but larger stores are now slightly positive.
“It proves when you give customers good value and service they see the bigger Extra store format as being of the most value when it comes to doing their overall shopping trip.”