Tesco to scrap profit target to revive UK sales
TESCO is set to abandon its industry-leading profit target as it attempts to win back customers and revive flagging UK underlying sales.
At an investor event tomorrow, chief executive Philip Clarke is expected to announce it will not stick to its 5.2 per cent margin guidance – the highest in the country – so it can operate without a “straightjacket” and better compete with rivals.
“It is definitely a profit-reset, but as the company has guided down investor expectations well ahead, it is hardly a profit warning,” said Bernstein analyst Bruno Monteyne.
Clarke will update investors on Tesco’s turnaround strategy, with analysts expecting the company to announce plans for further store refurbishments and price cuts on key products as well as the sale of some of its smaller struggling overseas businesses such as Turkey.
Exane BNP Paribas analyst John Kershaw said: “It will be an important event for Tesco – its team needs to demonstrate that it is now on top of events and has a coherent plan to address the threats of the discounters and the shift in shopping patterns.”
He also called on Tesco to further scale back spending and take further action in “ending the space race”.