There hasnt been much in the way of news fromTesco(LSE: TSCO) since the company issued its trading statementfor the 13 weeks ended 30 May 2015, at the end of June.
And after a flurry of news releases at the end of last year, some investors could be concerned about the lack of correspondence between the management team of the UKs largest retailer, and the groups shareholders.
Still, no news is good news, and there seems to be plenty going on behind the scenes at Tesco.
Long-term play
Tescos turnaround was always going to taketimebut the retailers management has all the tools at its disposal to instigate a recovery. Indeed, Tescostroubles are similar to those faced by larger peerCarrefourseveral years ago.
Carrefour, the worlds second largest retailer in terms of sales, was hit hard by the European debt crisis. Sales collapsed across Europe and during 2011, the companys share price was cut in half.Drasticaction followed.
Out went Carrefours old management team and new managers embarked ona ruthless cost-cutting programme. Carrefoursdividend payout was scrapped and the groupbegan exciting markets around the world.
It took nearly two years for Carrefoursrecovery to gain traction and the company is only just starting grow again.
Only just started
Compared to Carrefours turnaround, Tescos restructuring has only just started. The company kicked off its reorganisation during January, announcing a raft of cost-cutting measures, the benefits of which should begin to show through within the companys next few trading statements. However, the bulk of the cost savings will take several quarters to filter through as Tesco merges its offices and exits costly contracts.
Whats more, it is takingtimeto process and discuss the sale of Tescos international businesses. Tesco is trying to reduce its 22bn debt pile by selling off lucrative assets like itsDunnhumby data management business for 2bn and the groupsKorea business, which has a 4bn price tag. Managementis trying to avoid a fire-sale by taking time to get the best price possible for these businesses.
But overall, things are changing at Tesco and itsclear that shoppers are slowing their exodus from Tescos stores. During the first quarter of 2014, Tescos UK sales fell by 4%, which marked a low point in the companys performance. By the fourth quarter of 2014 declines had slowed to 1.7% and during the first quarter of 2015, Tescos like-for-like sales fell by 1.3%. Like-for-like volumes rose 1.4% during the 13 weeks ended 30 May 2015.
Also, Tescos Europeansales are starting to show signs of life. Total European sales for the13 weeks ended 30 May, Tescos central Europe sales volumes rose 2.2% on a like-for-like basis and this trend should continue as the European economic recovery gains traction.
The bottom line
All in all, Tescos recovery is starting to take shape. However, just like Carrefours recovery, Tescos turnaround will take time.
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Rupert Hargreaves owns shares of Tesco. The Motley Fool UK owns shares of Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.