Tesco presents “Finest” stores proposal to boost profit margin

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// Tesco proposes entire “Finest” stores with cafes
// Move would see supermarket compete with premium grocers like M&S Simply Food
// CEO Dave Lewis says future emphasis will focus on total sales instead of like-for-like growth

Tesco this week presented a new plan to launch “Finest” stores to analysts and investors as it looks to move into the premium end of the grocery market.

In a bid to reduce its exposure to the so-called squeeze middle, Tesco’s Finest stores would compete with Marks & Spencer’s Simply Food.

As part of its at capital markets day on Tuesday at its headquarters at Welwyn Garden City, the supermarket giant showed an illustration of a branded store selling its premium product range, as well as a cafe with indoor and outdoor seating.

Tesco pointed out that the stores could generate an estimated operating profit margin of seven per cent, twice the level the company as a whole makes.

One analyst at the event described the idea as “something [Tesco is] actively thinking about,” according to the Financial Times.

Now into its fifth year of its turnaround plan, Tesco’s Finest store concept is one of a range initiatives the supermarket is considering as it builds on its recent recovery in sales growth and profit margins.

Chief executive David Lewis told the meeting that the emphasis in future would be on total sales rather than like-for-like growth, and on cash generation rather than profits. He added that there was further scope for margin expansion from cost savings and productivity improvements.

There was little mention of Jack’s, the discount format Tesco launched last year as a competition to Aldi and Lidl, and to much press attention.

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