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Tesco recovery takes hold; shares soar

Wednesday, October 05, 2016 - 01:39

Tesco, Britain's biggest retailer, has said it will increase investment in its stores and distribution network to boost profitability over the next three years after reporting strong first-half results that sent its shares soaring. Hayley Platt reports

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The recovery at Britain's biggest retailer remains on track. Tesco reported its third consecutive half year rise, with operating profit up 60 percent. It says it'll hit its full year target of 1.2 billion pounds. The news sent shares soaring 10 percent to a 13-month high. SOUNDBITE (English) TESCO CEO, DAVE LEWIS, SAYING: "It shows that customers are rewarding the Tesco effort with more of their custom as they appreciate what it is we've done in prices and service and availability and what you see is a profit that starts to recover even though we've invested 6 percent lowering our prices." It's an impressive turnaround for a business which reported a record loss just last year. The business has been fighting back from a costly accounting scandal, falling food prices and a ballooning pension deficit. Not to mention the changing habits of shoppers. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "They are finally catching up and they are finally competing again with these discount retailers. What that means in the shorter term is that margins are lower which is going to impact profits at the end of the day." Lewis plans to cut Tesco's operating costs by improving its distribution network and simplifying its store operations. He'll increase capital expenditure to pay for it and says the falling pound ISN'T helping. SOUNDBITE (English) TESCO CEO, DAVE LEWIS, SAYING: "For sure sterling does have an impact on cost inflation but our job is to try and offset that, we don't welcome it at all, we would want to continue to sharpen the offer we give to customers." Other Brexit issues are also a worry. But Tesco still maintains a 28 percent share of the British grocery market.

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Tesco recovery takes hold; shares soar

Wednesday, October 05, 2016 - 01:39