MIDAS SHARING TIPS: If you like sharing the profits with a Whoosh, check out supermarket giant Tesco’s new delivery campaign
With social media feeds filled with empty supermarket shelves and truck driver shortages, you might have expected Tesco’s half-year figures to be a story of doom. Still, the retailer remains optimistic and continues to capitalize on the lifestyle changes we all made during the early stages of the pandemic.
Days lining up in front of stores two meters apart in the rain may seem like a bad dream, but the shift to online shopping spurred by the pandemic restrictions remains very real. Online sales are up 74% from two years ago, a trend that shows no signs of abating.
But while online sales flourish, Tesco is doing well elsewhere as well. Overall revenue is up more than 8% from the pre-Covid era, while the company even managed to slightly beat last year’s sales figures. This despite the exceptional sales that supermarkets enjoyed when we couldn’t go out to restaurants or buy lunches in sandwich shops. Profits more than doubled to Â£ 1.1 billion.
Road to Wealth: Tesco’s Whoosh online platform delivers groceries from its Express stores in less than an hour
So how has Tesco outperformed the market? Managing Director Ken Murphy attributes it to a resilient supply chain and deep supplier relationship that she has developed over time. Initiatives such as its Aldi price alignment system have enabled it to stand up to popular German discount chains, while its Club card system allows it to know its customers better than most of its competitors and to reach them by result.
Tesco never rests on its laurels. The company is always experimenting with new initiatives, having recently launched into on-demand grocery shopping with its Whoosh platform, delivering groceries in less than an hour from its Express stores.
The latest figures suggest that Express stores are faltering on sales, indicating that on-demand delivery could make inroads into the convenience market. In this way, Whoosh can help Tesco to maintain its market share.
The supermarket has also identified Â£ 1 billion in cost savings it can achieve through streamlining operations. With all the good news, Murphy has raised annual profit expectations in the order of Â£ 2.6bn. He also announced a share buyback program that is expected to put upward pressure on the share price.
Despite all the good news in the wagon, there is still room for concern. The disposable income of most households is set to decline sharply as energy prices rise and inflation continues to soar. Whether Tesco is able to maintain its reputation as a value-for-money retailer will be key to its success in retaining customers who might otherwise switch to Aldi or Lidl.
Brokers reacted positively to Tesco’s numbers, with some including Barclays raising their expectations for the share price.
Midas Verdict: Tesco had a good pandemic. The question that remains is whether it can cope with the supply chain issues and declining consumer firepower that appears to be on its way this winter.
The odds are in Tesco’s favor, as it has costs it can cut, a supply chain that is the envy of its competitors, and even a bank that appears to be doing well despite closing its account operation. running.
After the Morrisons private equity auction, some are even speculating that the company could be on someone else’s shopping list. This could give shareholders a boost. To buy.
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