Every little helps as sales at Tesco show slight improvement but problems remain

Impact of the supermarket’s new boss already being felt on bottom line

At last, something for the man with the toughest job in retail to smile about: sales at Tesco have returned to growth for the first time in a year.

Price cuts implemented by new boss Dave Lewis tempted an extra 236,000 customers to fill their trolleys at Britain's leading supermarket chain over the past 12 weeks, in a sign that the grocer may be regaining the trust of shoppers. According to the latest data from research firm Kantar Worldpanel, this helped push its sales ahead by 0.3 per cent year-on-year.

Although Tesco's market share continued to decline, falling from 29.2 per cent to 29 per cent, its sales performance over the 12 weeks to February 1st outstripped that of its large rivals for a change. At Asda, for example, sales over the same period slid by a hefty 1.7 per cent and there were falls of 1 per cent for Sainsbury and 0.4 per cent for Morrisons.

Tesco shares have almost halved over the past torrid 12 months, which have seen a series of profits warnings, the sacking of its chief executive and suspension of senior employees over a £263 million accounting scandal. Yesterday they bounced 4 per cent higher at one stage as investors dared to hope that the recovery might finally be underway.

The return to sales growth provides welcome reassurance that the new boss is having an impact, but analysts cautioned once again that the road to recovery at Tesco will be a long one.

Cost-cutting

The cost-cutting programme unveiled by Mr Lewis last month is extensive, with 43 stores to be closed and the construction of a further 49 abandoned. He is certainly living up to the “Drastic Dave” nickname earned at former employer

Unilever

.

But, along with the closure of Tesco's head office in Hertfordshire, the retrenchment will require ruthlessly efficient implementation from an already-stretched management team. New UK stores boss Matt Davies, who joins from the cycles and car parts group Halfords, is widely-respected for his retail, motivational and team-building skills, but does not arrive at Tesco until June.

In the meantime, for every bit of good news at Tesco, it seems there’s more bad news. Last week the new grocery industry watchdog launched an investigation into the group’s relations with its suppliers, notably delayed payments.

Announcing the probe, Christine Tacon of the Groceries Code Adjudicator (CGA), said she had "a reasonable suspicion" that Tesco had breached the industry's code of practice, breaches which she claimed involved a number of suppliers and "significant sums of money".

The CGA’s investigation will take nine months, adding to the burden on the management team at Tesco, which is already dealing with investigations by the Serious Fraud Office and the Financial Reporting Council.

And just a couple of days ago the group ran into a fresh row over its demands on suppliers as it emerged they had been asked to cut prices in line with recent falls in commodity costs or risk being replaced by cheaper suppliers.

Pensioner bonds

There are still 84 days to go until Britain goes to the polls but the rows over pre-election giveaways are in full swing.

Chancellor George Osborne has achieved the feat of enraging both the opposition and members of his own party with the extension of a special savings deal for wealthy pensioners.

The so-called pensioner bonds, launched last month, have proved hugely popular. Offering an interest rate of 2.8 per cent for one year, or 4 per cent if the money is left for three years, the bonds have proved hugely popular, with more than 600,000 over-65s snapping them up already, a figure which is expected to rise to more than one million.

Now the Chancellor has extended the availability of the bonds for another three months, at an estimated cost of £350 million (€472 million). But he’s been accused of buying the votes of the elderly, who likely to vote and also more likely to vote Tory.

Ashley Seager, co-founder of the Intergenerational Foundation, described the move as a cynical "bung" to the grey vote while the "packhorse" younger generation struggle to buy a house, repay their student loans and save for a pension.

And one of Osborne's own MPs, Tory Phillip Lee, warned that the ploy of giving such preferential rates to a specific section of the community could deter even more young people from voting at all. Fiona Walsh is business editor of theguardian.com