Tesco (LON:TSCO) shares surged as much as 9% on Wednesday as investors cheered the clearest signs yet that the group has turned a corner.
Confidence in CEO Lewis's team was bolstered further by detailed margin targets which added credibility to execution prospects.
It also has to be noted however that investor expectations have been managed with a great deal of alacrity too.
There will have been few other periods in Tesco’s history when news of a 50% rise in capital expenditure to £1.5bn would not place a lid on its stock price, at best.
For now, the worrisome widening of Tesco's pension deficit—one of the factors extending the time before the group can begin paying dividends again—has been shrugged off. It shows shareholders recognise that ongoing and acute threats to market share (the group reiterated these on Wednesday) call for actions which, in a different era might have been conducted more gradually. Investors are welcoming news of Tesco’s most aggressive defence of its market position for a decade, regardless of the limited margin for error and the fact that the moves make further substantive profit growth following this year’s rebound far from certain.
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