Shares in supermarket giant Tesco jumped over 13 percent on Wednesday, as investor sentiment turned positive on strong sales in the first half of 2016.
Like-for-like sales up 0.6 percent in the first half of the year, marking the third consecutive quarter of sales growth for the group under the management of CEO Dave Lewis. However the balance sheet still showed vulnerability, with group pre-tax profit down 28 percent on the same period last year.
Lewis took the opportunity to launch a three year plan to boost profitability as a price war with budget supermarkets Lidl and Aldi put pressure on margins. Despite saying the supermarket has made “significant progress”, Lewis plans to slash costs by a further £1.5 billion by 2019. He said:
“We have made further strong progress in the first half, with positive like-for-like sales growth across all parts of the Group as we re-invest in our customer offer whilst rebuilding profitability in a sustainable way.
“The entire Tesco team is focused on serving shoppers a little better every day. We are more competitive across our offer. Prices are more than 6% lower than two years ago, availability and service have never been better and our range is more compelling. Our new fresh food brands are performing ahead of expectations, improving our value proposition and further removing reasons for customers to shop elsewhere.”
The grocery market has been increasingly competitive of late, with pressure from budget supermarkets damaging the balance sheets of all Big Four supermarkets. Lewis continued:
“Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future. Today, we are sharing the plans we have in place to become even more competitive for our customers, even simpler for colleagues and an even better partner for our suppliers, whilst creating long-term, sustainable value for our shareholders.
Tesco (LON:TSCO) shares are currently up 12.72 percent at 212.60 (1428GMT).