Tesco's new boss looks to avoid nightmare before Christmas

Fri Dec 12, 2014 9:15am EST
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By Paul Sandle and James Davey

LONDON (Reuters) - Dave Lewis, the new boss of Tesco (TSCO.L: Quote), Britain's biggest grocer, is betting on a customer charm offensive coupled with selective price cuts to prevent poor Christmas trading compounding an already disastrous year for investors.

The group, like its big three UK rivals Wal-Mart's Asda (WMT.N: Quote), Sainsbury's (SBRY.L: Quote) and Morrisons (MRW.L: Quote), has suffered as shoppers turn against the traditional big weekly hypermarket shop.

Instead they are increasingly spending more at discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL], at convenience stores and online, with the odd treat from upmarket retailers Waitrose [JLP.UL] and Marks & Spencer (MKS.L: Quote) thrown in.

Tesco's woes have been exacerbated by an accounting scandal requiring a total re-setting of its relationships with suppliers. A fourth profit warning in five months on Tuesday sent its shares, which have halved in value this year, to a 14-year low.

"Most people think the wider recovery at Tesco is going to be painful and very protracted. One tends to feel that like-for-like sales could well remain in negative territory for another 18 months to two years," said Charles Stanley analyst Sam Hart.

The last few weeks before Christmas, however, remain the busiest of the year for grocers, and Tesco's poor performance last Christmas, when underlying sales fell 2.4 percent, set the tone for a year to forget in 2014.

Given current trends, analysts don't expect any of Britain's big four grocers to exceed last year's Christmas performance on a same-store basis.

In an attempt to stem the rate of shopper defections, Lewis has recruited 6,000 extra workers into stores to improve customer service, while 6,000 head office staff are working half a day a week in stores in the run-up to Christmas.   Continued...

Shopping trolleys are seen at a Tesco supermarket in central London, December 9, 2014. REUTERS/Toby Melville