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Retail

Tesco Recovery ‘Very Much Under Way’, Bernstein Research Says

Tesco is set to post interim results next month that will indicate “an overwhelmingly positive message of trading improvements”, according to market analysts Bernstein.

A year on from the appointment of Dave Lewis (pictured) as Tesco’s CEO, Bernstein analyst Bruno Monteyne offered an appraisal of the retailer’s performance, saying that Lewis has “already delivered much more, much faster than any of us would have expected the day he started.

“The despair and excessive pessimism from November last year disappeared when Tesco delivered an almighty comeback during Christmas, despite having eight senior executives suspended during an investigation for accounting irregularities.”

On the retailer’s H1 results, due to be posted on 7 October, Bernstein/Monteyne anticipates UK margin at the retailer to be “80-90bps better than H2 2014, showing the start of the V-shaped recovery.

“Beyond this, there are still likely to be further trading improvements, news on further disposals, further changes to the Clubcard, and news of partners taking up excess space, all of which will support our bull thesis.”

On Tesco’s range-simplification policy, Bernstein advised to “keep in mind that Dave Lewis made a name for himself by cutting 20% out of one of the categories at Unilever. He knows first-hand how much trouble and costs excessive range creates.

“You only have to look at the hard discounters to be reminded that more range means higher costs. Range cuts result in buckets of cost savings.”

© 2015 - Checkout Magazine by Stephen Wynne-Jones

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