Britain's supermarket giant Tesco posts solid results showing its turnaround plan is bearing fruit. But opposition to the Booker deal and aggressive competition remain major issue for the retailer. Silvia Antonioli reports.
Tesco re-emerges from its mess but fails to impress. Britain's biggest supermarket beat annual profit forecasts, posted the first sales increase in seven years and slashed its debt. The results show Tesco recovering from an accounting scandal that plunged it into its worst crisis ever. But the numbers still not as strong as some were hoping. After rising 6 per cent in the past 5 trading days, its shares fell on Wednesday. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF RESEARCH, WILSON KING INVESTMENT MANAGEMENT, SAYING: "There are still a couple of disappointments. The lack of dividend for example while prudent is nonetheless something that lessens the attraction to the stock. But on the whole, and given the result that we have seen today Tesco does seem to be moving in the right direction." Some were also spooked by Chief Executive Dave Lewis confirming he intends to push ahead with a bid for wholesaler Booker, despite opposition. Two major shareholders say the 4-point-6-billion-dollar deal is too costly and a distraction from Tesco's turnaround plan. But CEO Lewis sees expanding in the fast-growing "out of home" food market as a winning ticket. (SOUNDBITE) (English) CHIEF EXECUTIVE OFFICER, TESCO, DAVE LEWIS, SAYING: "We are very much at the start of the journey. But I would not have proposed this (Booker deal) if I wasn't committed to making that happen." In the meantime, the retail titan is battling a change in consumers' habits - and the aggressive rise of German competitors. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF RESEARCH, WILSON KING INVESTMENT MANAGEMENT, SAYING: "Even though we have recently seen these decent numbers from Tesco we know that the likes of Aldi and Lidl for example, the deep discount supermarkets will be doubling their effort to further erode Tesco's market shares." So while the worst may now be behind for Tesco, it's still an uphill struggle to get back to the top.