Tesco boss Dave Lewis believes the grocer has “stepped forward” as a business after hitting its lowest ebb, but warned “nothing is guaranteed”.

Tesco boss Dave Lewis believes the grocer has “stepped forward” as a business after hitting its lowest ebb, but warned “nothing is guaranteed.”

Lewis said the embattled supermarket giant had made “really good progress” during the first half of its financial year, despite its operational profits tumbling from £779m to £354m in the 26 weeks to August 29.

Like-for-like sales dipped 1.1% during the period, although the grocer pointed to “further improvement” in like-for-like performance during its second quarter.

Transactions and sales volumes also rose 1.5% and 1.4% respectively during the first half, although profits in its core UK and Ireland business, now headed up by ex-Halfords boss Matt Davies, slumped 69.4% to £166m.

But Lewis said Tesco remained “on track to deliver what we hoped to deliver this year” in terms of profits, although he admitted there were “quite a lot of challenges” still to come during the second half of the year as he predicted further food price deflation.

Rock bottom

Andy Clarke, boss of Tesco’s big four rival Asda, said the grocer had hit its “nadir” after like-for-like sales slumped 4.7% in the 11 weeks to June 30.

Asked if Tesco had also hit rock bottom, Lewis said: “That’s our intention.”

He added: “We felt the second half of last year was particularly tough. The financial consequences of the model we had been running for a number of years really hit home – and we are rebuilding from there.

“We’ve stepped forward as a business both in terms of sales performance and profit performance – and against the aspiration to make the same amount of profit this year as we did last year. That would indeed imply a continuing progress.

“Nothing is guaranteed, but we feel quietly confident we are on track to do that.”

Portfolio review

Speaking to journalists on a conference call this morning, Lewis was at pains to emphasise that Tesco would not be offloading any further assets, following the successful sale of its Korean Homeplus business and the collapse of a deal to sell off data arm Dunnhumby.

“Portfolio reshaping, to make a contribution to reduce the indebtedness of the group, is now complete,” Lewis said. “We are not looking to make major disposals or sales of assets in order to help with the balance sheet.

“I am really keen to stop speculation in Central Europe, Thailand and Malaysia about what it is that we may or may not do.

“We are all now focused on generating a better return from the assets we’ve got.”

Customer loyalty

Lewis added that Dunnhumby was “very much a part of the Tesco group” going forward, despite admitting it was previously up for sale.

“It was very public that we put the business up for review, given the situation we had eight or nine months ago,” Lewis said.

“We have gone through an exhaustive process and we yesterday came to the conclusion that, having looked at all those proposals – of which there were many – the most value-creating option for Tesco shareholders was to retain it in the group.

“Data and its ability to help us build customer loyalty is a big part of the customer proposition from a Tesco point of view, so it is very much part of the group.

“We’ve always been proud of that business, so we are happy to retain it and we will invest in it and grow it ourselves going forward.

“I’ve always been very, very clear that I would never sell an asset below what I think it is actually worth.”