tesco trolleys

Is this as low as Tesco can go?

Dave Lewis will be reporting Tesco interims tomorrow, facing analysts, pundits and retail consultants, and he will certainly be planning on this being the last of the bad news. What’s the saying? The only way is up?

The share price may have a little further to fall when Tesco reveal anything up to a £5bn loss which will include property write-downs, a pension black hole, accounting errors and costs to restructuring, but with sales edging upwards and all the bad news dispensed with, there is reason for his optimism.

The business is being restructured to be more customer-facing, offering a level of service reminiscent of the good old days when Tesco was a trusted grocer on the High Street. The upside to the loss of jobs and is that the business should be more agile and efficient, and able to respond to customers in a way that builds that trust. A streamlined head-office conveys a feeling of agility and simplicity for suppliers and a lower cost structure which customers may feel will permeate through to shelf prices too.

Proof that the restructuring will have the desired effect is thin on the ground with only a couple of trading quarters under Lewis’ belt. However like for like sales are getting better and will be taken as a positive indication that the decisions taken so far are the right ones and that Lewis is the right man for the job.

The city could be further reassured should Tesco announce progress on a deal to dispose of Dunnhumby, or a partnership arrangement to make use of overspaced stores, although that may be wishful thinking and could be premature.

What we don’t really want to hear is another round of price cuts. Price could be a sensitive subject in the coming weeks as Which? pursue its super-complaint of price duping in supermarkets. The Big 4 have all been cutting back on promotional activity to reduce confusion for the customer including Tesco, and any investigation into misleading price activity will undermine the trust that Lewis is working so hard to recover.

Tesco will not be another discounter. It could however be creating a new simplified business model for supermarkets that others will want to emulate: more customer facing staff, simplified promotional activity and supplier terms and collaborative partnerships with other retailers.

Lewis has started his tenure well and although will be facing tough questions tomorrow, has a calm quality that conveys confidence.

Retail Remedy have worked with retailers large and small to deliver customer focussed retail strategies. If we can help you, get in touch.

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