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Tesco credits stronger brand for improved customer numbers

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Tesco this week said its stronger brand had attracted more customers, boosting sales and profits in turn.

The supermarket, an Elite retailer in IRUK Top500 research, reported revenue of £57.5bn in its 2017/18 full-year, 2.8% up on the previous year. Pre-tax profits of £1.3bn were 795.2% up on last time.

Chief executive Dave Lewis said: “This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value.

“We have further improved profitability, with group operating margin reaching 3% in the second half. We are generating significant levels of cash and net debt is down by almost £6bn over the last three years. All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco.

“I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business.”

Here’s what we learned about Tesco’s multichannel retailing strategy from its full-year report.

The customer
Tesco said 260,000 more customers had bought from Tesco over the period. It said its monitoring of brand perception had improved by 2.7 points, while perception of value had risen by 2.0 points.

Strategy and innovation
Tesco reported sales growth across its channels: online grocery sales were up by 5.1% during the year, with higher order numbers and average basket sizes, while its Express convenience stores saw sales growth of 2.7%, and large stores of 1.9%.

The retailer released a contactless clubcard during the period to 18m club card members. It said the new Tesco Pay+ app for its UK stores had so far been downloaded 458,000 times.

It also relaunched its own brand range and introduced a new Wicked Kitchen vegan range.

Tesco’s strategy of repurposing space in larger stores has so far seen 75,000 sq ft f space in 20 UK stores turned into concessions for retailers including Aradia Group, Holland & Barrett, Dixons Carphone and Next, while, following Tesco’s merger with wholesaler Booker, a new Booker Chef Central concept stores has opened within its Bar Hill, Cambridge, store, which is aimed at professional caterers but is open to all customers. Its repurposing programme, it said, “has focused on improving the ease and relevance of our large-store shopping trip for customers”. Similar approaches beyond the UK have seen surplus space used by retailers from H&M and Decathlon in Central Europe, and MR DIY and Major Cineplex in Asia.

The UK store estate saw 24 new stores added and 22 closed, with Tesco superstore and Tesco Express format openings offset by closures of Tesco Metro and One Stop stores.

Operations and logistics
Tesco rolled out a same-day online grocery delivery service with the capacity to reach, it said, 99% of UK postcodes.

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