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Tesco looks well set for 2022

by LLB Reporter
13th Jan 22 10:53 am

Despite a strong Christmas and a small upgrade to forecasts, Tesco didn’t do enough to impress the markets, at least in early trading on Thursday.

However, there was still plenty to please long-term investors. The more focused strategy progressed under Dave Lewis and his successor Ken Murphy has helped deliver the supermarket’s highest market share in four years.

Tesco’s online sales continue to track much higher than pre-pandemic levels. This is important as the greater scale in this part of the business is improving its profitability.

“Tesco is also pushing the loyalty angle, funnelling 95% of its promotions through its Clubcard scheme. This means investment in promotions has a double-whammy effect, increasing customers’ attachment to the brand as well as getting them through the doors in the first place,” said AJ Bell’s Russ Mould.

“For all the buzz around rapid delivery – served by Tesco through its Whoosh brand – the company is prospering by getting the basics of grocery right ensuring that its stores are clean, well presented and easy to navigate and keeping prices keen enough to keep customers on board.

“The challenge posed by the likes of Aldi and Lidl has changed somewhat from when they were complete upstarts; they’re now more mature businesses and therefore somewhat less agile than they were when they turned the sector on its head a few years ago.

“Inflation, as long as it is relatively mild and Tesco can keep tight control on its own costs, isn’t all bad news for the business and, with shopping for food economically insensitive, the company is looking well placed at the start of 2022.”

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