Tesco boss Dave Lewis has a 75% chance of successfully turning round the company, according to a report by a leading analyst company today.
The report by Bernstein claims that the UK’s biggest retailer is in the “recovery on track zone” after Kantar figures suggested Tesco’s good Christmas performance was no fluke, and figures from the Grocer 33 showed tangible improvement in availability and service.
Bernstein also praised Lewis for his plans, exclusively revealed by The Grocer, for a massive range review, which is expected to see Tesco’s SKUs cut by up to a third, saying the move could allow Tesco to fast forward its recovery.
“Encouragingly, trends in food & drink have accelerated from the excellent Christmas,” said senior analyst Bruno Monteyne.“Importantly this has not all been about price,” said. “Tesco has not purchased this market share simply by resorting to unsustainable price cuts and vouchering (see Morrisons last summer). This is an improved offer that is resonating with customers.”
Monteyne said the G33 data of recent weeks showed “clear improvement” relative to Asda and Morrisons, while Aldi and Asda had matched Tesco’s price cuts rather than undercut them, suggesting there will be “no tit for tat price war” .
“With Tesco demonstrating improved service and availability it is likely they will be happy with parity on these prices, with their range, service and quality giving them something different to Aldi an Asda,” said the report, which pointed out that Tesco’s most recent price drops had all been on the most popular branded items such as Kellogg’s Corn Flakes and Colgate Toothpaste.
Bernstein also claimed Lewis’ swift decision to make redundancies across the businesses, but starting with head office cuts, had “united” the business. “No time is being lost with the head office redundancies. By starting the redundancies at the most senior level Dave Lewis unites the business.
“By appointing Boston Consulting Group to help with the range-rationalisation he can potentially deliver ahead of plan: towards the summer/autumn rather than end of financial year. This is looking like a real turnaround. There is still a long way to go, but we now give Tesco a 75% chance of recovering UK margin to 3.25%.”