Tesco boss Dave Lewis hails end of crisis as sales grow for first time in three years

Tesco chief executive Dave Lewis has said the supermarket is now out of crisis, after the supermarket giant announced its first quarter of like-for-like sales growth in three years.

Tesco: CEO Dave Lewis stopped short of saying the supermarket had turned a corner
Tesco: CEO Dave Lewis stopped short of saying the supermarket had turned a corner

UK sales in the 13 weeks ending 27 February grew 0.9%, with volumes up 3.3%, thanks partly to a strong performance over the Christmas period.

A solid performance from Tesco’s international businesses meant group sales for the quarter were up 1.6%, and for the 2015/2016 financial year, they were flat. Pre-tax profits were £162m - compared to a £6.3bn loss the previous year, the worst results in Tesco's history.

Lewis was unwilling to state that Tesco had ‘turned the corner’, but said it had made significant progress on the three priorities he set for the business when he succeeded Philip Clarke in September 2014: to regain competitiveness, strengthen the balance sheet, and rebuild customer trust.

"We feel like we’ve stabilised the business, said Lewis. "We’re not in the crisis we were 16 months ago. Through the course of the year, we very systematically improved our availability, service, range and price.

"We’ve made a huge amount of progress - but it’s a very challenging and uncertain deflationary market."

Customers understand our marketing

Lewis highlighted Tesco’s recently launched Farm Brands for its value fresh food range as an example of the improvement in its customer offer in the last year.

A brand is the combination of the quality of the product consistently, and the price position, customers understand that

The brands, which feature fictional farm names, attracted a mixture of praise and ridicule when they were announced last month. But Lewis gave a robust defence of the strategy, saying that "customers understand" what they are doing.

"We’ve been really clear with our customers that we’re creating brands, that we’re launching brands here," he said. "The British customer is much more savvy about marketing than most people give them credit for.

"What we do in terms of branding - and not just us, but others - is by picking a name for the farm brands, we set a quality specification that then becomes consistent and matches with the value equation.

"That’s what a brand is - it’s the combination of the quality of the product consistently, and the price position. Customers understand it, and the vast majority of the comments we’ve received have been very appreciative."

Price matching is here to stay

Tesco’s rival Sainsbury’s - which until now, has been the only one of the big four supermarkets in growth - announced last week it was ditching its Brand Match scheme to focus on everyday low prices.

Brand Guarantee is unique. It gives customers peace of mind - it's a real reassurance, and a service.

The move prompted some commentators to speculate that price matching schemes could become less of a feature of shopping in the UK, as the major players attempt to replicate the pricing model that has helped Aldi and Lidl achieve rapid growth.

But Tesco made some mischief at the expense of its rival when it announced it would accept Sainsbury’s Brand Match vouchers for a limited time.

And Lewis was insistent that Tesco’s scheme, Brand Guarantee, was here to stay.

"The critical thing is that Brand Guarantee is unique," he said. "It’s a direct guarantee that you don’t walk out of one of our shops paying more for a branded product than if it were on promotion in another store, as long as you’re buying ten items.

"That gives customers peace of mind - it’s a source of real reassurance, and it’s a service. They don’t have to shop around for the best deal for the brands they care about."

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