Tesco announced this morning that there seems to be evidence that it is accomplishing a turnaround in the wake of an accounting scandal that coincided with declining sales and profits, saying that first half operating profit was up to the equivalent of $770.4 million (US), from $473.2 million during the same period a year earlier. Revenue for the period was up just a tick, to $34.8 billion from $34.6 billion a year earlier. Same-store sales in the UK were up 0.6 percent, while total store same-store sales were up one percent.
The Wall Street Journal writes that Tesco seems to have improved profitability in several ways: "It has cut its product range by 23%, lowered regular prices 6% while eliminating 40% of promotions, and added 12,000 more customer-facing employees. It has also sold noncore businesses including its gardening arm, Korean business and coffee-shop stake, and has slashed back-office jobs."
The Journal notes that CEO Dave Lewis has established several goals for the company - to achieve "an operating margin of between 3.5% and 4% by fiscal 2020," as well as cut operating costs by $2 billion (US) "by improving distribution and simplifying its store operations." Tesco says it will spend $1.7 billion "a year in capital expenditure through fiscal 2020 to drive these changes."
The Wall Street Journal writes that Tesco seems to have improved profitability in several ways: "It has cut its product range by 23%, lowered regular prices 6% while eliminating 40% of promotions, and added 12,000 more customer-facing employees. It has also sold noncore businesses including its gardening arm, Korean business and coffee-shop stake, and has slashed back-office jobs."
The Journal notes that CEO Dave Lewis has established several goals for the company - to achieve "an operating margin of between 3.5% and 4% by fiscal 2020," as well as cut operating costs by $2 billion (US) "by improving distribution and simplifying its store operations." Tesco says it will spend $1.7 billion "a year in capital expenditure through fiscal 2020 to drive these changes."
- KC's View:
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It would seem that if Dave Lewis's goal is to do more with less, he is achieving it. But at some point, I think, it is going to be important to grow same-store sales, not just profit more from what already exists.
