Tesco CEO Dave Lewis has announced preliminary annual results designed to heat up investor sentiment, says Ray Gaul, vice president of research and analytics at Kantar Retail.
Once under pressure on all fronts, Lewis and his team have given the company some "breathing room, particularly on the balance sheet", according to Gaul.
Earlier this week, Tesco posted a flat performance for its full year endind February 29, highlighted in its preliminary results.
Like-for-like group sales were 0.0 per cent, while its UK & Republic of Ireland market declined by 0.7 per cent.
The group has sold both profitable and unprofitable business units to refocus on the core UK grocery business, and during the trading year, the company reduced indebtedness by a "whopping" £6.2 billion, he said.
"They have also generated cash – £2.2 billion this year – and this will continue," he said. The group sold its stake in Lazada this week.
"As a result, and with investments in better pricing, a more attractive fresh produce and clothing offer, and improvements in staff motivation and service, Tesco is seeing footfall and shopper growth in all parts of the UK grocery business."
Tesco’s shares were trading at multi-year lows ahead of Tesco’s last financial announcement, but are now rising steadily as the news coming out of Tesco goes from good to better.
"However, the most important turnaround will be seen in Tesco’s large formats." With Tesco Extra stores now seeing positive footfall growth, this in turn is driving higher like-for-like sales.
The UK business grew like-for-like sales by 0.9 per cent in the fourth quarter after multiple quarters of declines.
"Looking to 2016/2017, Tesco will continue to battle deflation and aggressive pricing strategies from its main competitors, including Aldi and Lidl, but is in a much better position to fight as it looks forward," Gaul added.
Regarding the grocer's February's performance
Kantar Worldpanel’s Fraser McKevitt said, “An increase in shopper numbers suggests Tesco could return to growth in the next few months.”
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