Martin Flanagan: Tesco turnaround takes small steps forward

I mentioned in this column last week that, with the sale of Dobbies Garden Centres, Tesco boss Dave Lewis was not slacking off on his turnaround of the group to get it back focused on supermarket basics.

Tesco boss Dave Lewis. Picture: PA
Tesco boss Dave Lewis. Picture: PA

I also wrote that an impressive facet of Lewis’s tenure, following the exit two years ago of his hapless predecessor Phil Clarke in the wake of profit slumps and an accounting scandal, was his successful juggling of the two balls of restructuring and operational recovery.

Yesterday he provided more evidence of this. Tesco announced it had sold off another non-core business, the Harris + Hoole artisan-type coffee chain, at the same time as unveiling only its second successive quarter of like-for-like sales growth in five years.

Same-floorspace sales rose 0.3 per cent in the latest quarter after a 0.9 per cent rise in the previous three months. They are not stellar figures, but a recovery has to start somewhere and two positive quarters are good omens of stabilisation.

Anyway, with the systemic changes in food retailing that have made the sector a price battleground it is unlikely we are going to see steep sales rises for quite some time yet, if ever again, in a mature industry.

Lewis himself admitted that, while he was pleased with what had been achieved so far in restoring public trust and affinity with the Tesco brand, there are many factors out there not within management control. There are bound to be hiccups in the recovery. Deflation and the discounters continue to be the profit margin squeeze from hell. The £1 shops add to the pressures, as will Amazon Fresh coming in from left-field.

Major store openings in the sector seem a thing of the past, the surge into online and convenience store food shopping will continue, and people seem set on shopping more frequently but for fewer items at any one time.

But Lewis’s big achievement is that he seems to have stopped the rot at Tesco. Ideally, the next step would be for the group to raise its sights, raise its game and raise the bar for the opposition.