For Tesco (LON:TSCO) shareholders, the long-awaited turnaround is confirmed. As well as operating profit leaping 34% to £2.062bn, trumping expectations, Tesco remains atop of Britain’s ultra-competitive market with a thirteenth quarter of underlying sales growth.
Tesco’s health remains robust as it grinds towards long-term pillars that have guided CEO Dave Lewis’s turnaround.
- £532 in-year cost savings bring the total to £1.4bn vs. £1.5bn target
- Retail operating cash flow reaches £8.6bn, up 2.5bn, against a £6bn goal
- Operating margin now 3.45% vs. 3.5%-4% target
Yet investor applause has limits. Tesco shares have risen 2.8% at most on Wednesday; appropriate as recovery inches forward. Sensitivity to discounters, e-commerce, the economy and regulatory push-back remains. Lewis sees no “discernible change in buying behaviour” from Brexit, whilst Tesco’s own planning to safeguard working capital is “proactive”. Yet fall-out will be difficult to predict. Lewis accepts assumptions made when setting recovery targets have been upended.
Clouds on the outlook haven’t cleared entirely.
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