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Tesco says it aims to improve margins and enhance cash growth

Published: 21:21 18 Jun 2019 AEST

Tesco
Tesco is on track to meet most of the goals of its turnaround plan

Tesco PLC (LON:TSCO) shares gained on Tuesday as the supermarket group said it has a plan to further improve margins and enhance cash growth ahead of profit.

In a presentation to given at its Capital Markets Day for analysts and investors, Tesco said it has “further cost reduction and mix opportunities that allow us to offset inflation, improve our customer offer and/or increase margin”.

The company added that it sees “significant optionality for sustainable competitive growth”.

READ: Tesco sales growth slows without hot weather and royal wedding

Tesco said it sees opportunities to grow the distribution capacity of its online business by 35% and boost its Clubcard loyalty scheme.

It also plans to develop partnerships such as those with urban fulfillment center firm Takeoff Technologies and delivery robot company Starship Technologies.

In April, Tesco said it was on track to meet most of the goals of its turnaround plan, including a margin target of earning 3.5p to 4p of operating profit for every pound customers spend by the end of the 2020 financial year.

Chief executive Dave Lewis kicked off a restructuring of Tesco shortly after he joined the company in 2014. He has helped to revive Tesco’s fortunes after being rocked by an accounting scandal and a downturn in sales and profits.

Under his leadership, Tesco bought UK wholesale business Booker last year and introduced a new discount chain called Jack's.

Lewis has also improved Tesco’s buying power through a “strategic alliance” with French retail giant Carrefour, which became operational last October.

However, last week the company revealed first quarter sales growth slowed due to the absence of hot weather and a royal wedding that boosted last year’s results.

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