A Tesco's store is pictured in south London. Tesco's trading profit for the year to February 22 was £3.3bil (US$5.52bil), in line with forecasts but down on a restated figure of £3.52bil posted in 2012-13 - AFP Photo.
LONDON: Tesco, Britain's biggest retailer, said its recovery was gaining momentum as it reported a second straight quarter of UK sales growth, though it said it could take up to three years for this to feed through to its share price.
Hammered by changing shopping habits, the rise of German discounters Aldi and Lidl and an accounting scandal, Tesco has been fighting back under Chief Executive Dave Lewis who took charge in Sept. 2014.
"We have stabilised the business and started to generate growth," he told reporters on Thursday.
His focus is on lower prices, streamlined product ranges, better customer service and simplified relationships with suppliers, the root cause of the accounting scandal that was uncovered shortly after he arrived and is the subject of a criminal investigation by Britain's Serious Fraud Office.
Though former Unilever executive Lewis has impressed investors with his decisive action since replacing the sacked Phil Clarke, Tesco's shares are still down 23 percent year-on-year, reflecting what the CEO called "a challenging market with sustained deflation."
Chairman John Allan told shareholders at the company's annual meeting they would have to be patient for the share price to reflect the supermarket's improving performance.
"I'm confident that eventually it will. But it's going to take another year or two or three, rather than another month or two or three I'm afraid," he said.
SUCCESSIVE QUARTERS OF SALES GROWTH
Tesco said sales at stores in its home market which have been open more than a year rose 0.3 percent in the 13 weeks to May 28, the first quarter of its current financial year.
That compared with analysts' forecasts of flat to up 0.5 percent and built on growth of 0.9 percent in the previous quarter.
It was the first time Tesco has reported successive quarters of UK underlying sales growth in more than five years and was boosted by a strong customer response to the March launch of seven new exclusive fresh food brands.
Despite its problems, Tesco remains the biggest supermarket chain in Britain with a market share of more than 28 percent.
Its shares rose up to 4.4 percent on Thursday but were flat at 166.6 pence by 1455 GMT.
"We believe Tesco will be a long-term economic winner but short term we have some concerns on Asda's
COFFEE OFF THE MENU
On Thursday Tesco said it had agreed the sale of its Harris + Hoole coffee shop business to Caffè Nero for an undisclosed sum.
Lewis has also cut thousands of jobs and sold businesses in South Korea and Turkey as well as the Giraffe restaurant chain and Dobbies Garden centres, as he looks to simplify the company, cut debt and rid Tesco of its junk credit rating.
Lewis said no more asset sales were planned.
Group like-for-like sales grew 0.9 percent, boosted by a 3.0 percent increase in international sales.
Analysts' profit forecasts for 2016-17 came down in April after Tesco warned that profit growth would be harder to deliver this year than last, given an industry price war.
Finance chief Alan Stewart said Tesco was comfortable with analysts' current consensus of 1.175 billion pounds ($1.74 billion), up from 944 million pounds in 2015-16.
Allan said the resumption of dividend payments was "very much in our minds", though he could not put a date on it.
Tesco has not paid a dividend since the first half of its 2014-15 year.- Reuters
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