'Drastic' Dave departs Tesco

Mr Lewis is leaving the supermarket in better shape than he found it. Although the longstanding UK grocery oligopoly has been disrupted, the group improved adjusted operating profits by more than a quarter to £1.41bn, driven by a more favourable product mix and savings generated by improvements in the store operating model. This, in turn, had a beneficial effect on cash flows. Retail free cash flow more than doubled to £814m, largely due to the improvement in profitability, but helped by a £114m working capital inflow. 

The UK business struggled at the top line, with like-for-likes down 0.4 per cent, but management noted it was “outperforming the market on volume terms”, with the 'exclusively at Tesco' range winning customers from competitors' comparable ranges. What's more, polling showed improving perceptions of the brand, with respondents rating it increasingly favourably in value, quality and trust terms.

There’s no telling how the incoming chief executive may decide to tweak the strategy, but for now the group looks to be making a play on convenience, accelerating its rate of opening for new Express stores in the UK to 150 over the next three years and investing heavily online. The group will open three urban fulfilment centres by next summer and plans to open more than 25 over the next three years.

The integration of Booker generated synergies of £54m in the half and is on track for around £140m by the end of the financial year. The company has seen organic growth equivalent to £700m in sales since the acquisition, but has sought to boost it further with the acquisition of Best Food Logistics, a food distribution company, announced alongside the results.

Bloomberg consensus forecasts are for adjusted EPS of 16.4p for FY2020, up from 15.4p in the year to February 2019.