Tesco today said that its focus on the customer experience had helped lift sales and and drive profits sharply upwards, by more than 690%.
Group sales at the UK’s largest supermarket, ranked Elite in IRUK Top500 research, reached £25.2bn in the half year to August 26, up by 3.3%, or 0.7% when currency fluctuations were discounted, while revenue of £28.3bn was 3.7% up on last time (1.4%, constant currency). Pre-tax profits of £562m were 691.5% ahead of the £71m reported last time (667.6%, constant currency).
Chief executive Dave Lewis said: “We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago. All of this is possible because of the focus we have placed on serving shoppers a little better every day. Our offer is more competitive and more customers are shopping at Tesco.”
The dramatic upturn comes three years after Tesco was hit by the discovery of a black hole in its accounts. Tesco said today that it may face litigation in relation to the overstatement of expected profits in 2014. Its merger with wholesaler Booker is currently going through investigation by the Competition and Markets Authority. The supermarket also said that Brexit could also cause disruption and uncertainty to the business, and that it would continue to monitor the potential risks and impacts on shareholders.
Here’s what the UK’s biggest supermarket said about its multichannel strategy.
The Customer
The customer is the main focus on Tesco’s strategy. The supermarket said it had seen the largest improvement in its industry in its net promoter score, which lifted by 11 points – reflected in accolades for the supermarket and for its bakery business. At the same time it kept food prices down – it said prices rose 1% lower than the rest of the market while it also reduced multi-buy promotions by 10%, year-on-year. Healthy options and fresh food proved popular.
Overall, UK customer transactions grew by 0.4%, and volumes by 0.3%. Tesco said that it focused on reducing short-term promotions and increasing the proportion of full-price sales, especially in clothing. “Combined, these changes are allowing us to invest further in our offer and offset inflation in our cost base while improving profitability.”
Multichannel
The retailer said it had improved its mix across geographies and channels. Online grocery sales grew by 4.6%, with increases in both order numbers and basket size, while the larger UK Extra stores saw sales grow by 1.6% on a like-for-like basis.
Digital innovation
Tesco rolled out a contactless Clubcard over the course of the year, as well as a Clubcard app. It also introduced monthly subscription plans.
Connected logistics
The supermarket rolled out a same-day delivery service across the UK. Tesco Now was also launched, offering delivery within an hour.
