Tesco boss's push on product availability bears fruit

By James Davey

LONDON (Reuters) - Lower prices and more staff got the headlines on Friday as the drivers of Tesco's (TSCO.L) better-than-expected Christmas performance. But behind the scenes moves to get more stock on shelves, and get it there faster, were also important factors.

These efforts, part of Chief Executive Dave Lewis' redesign of Tesco's operations, could have a longer lasting impact on the revival of Britain's biggest supermarket group after several years in turmoil.

When Lewis joined in September 2014, poor replenishment of stock and product availability were major issues for the grocer. However, Tesco's Christmas numbers indicated major progress in this area.

"I recognise that this may not be the most glamorous (and) noticeable part of our transformation but it is perhaps one of the most important," Lewis told reporters.

The new supply chain processes, such as better forecasting and computer systems, meant that during the peak Christmas week Tesco's total product availability was around 4 percent higher year-on-year.

Deliveries from Tesco's warehouses to its large stores showed a 2.5 percentage points improvement on their on-time performance, while for convenience stores delivery on-time was up more than 18 percentage points.

Those improvements meant some salad and fruit, for example, could have an extra two days on shelves before reaching sell-by dates.

“Why does this matter? It demonstrates the improvements that we’re making under the hood of our business, in how the company actually works," said Lewis.

"What it means is that whether customers are shopping in store or for home delivery they have been able to get more of what they wanted."

Tesco shares rose 6 percent on Thursday after it reported a surprise rise in Christmas sales, suggesting the firm may finally be recovering.

Sainsbury's (SBRY.L) and Morrisons (MRW.L) have also reported better-than-expected festive sales this week, adding to signs that Britain's biggest supermarket chains are making progress in their fight against the fast-growing German discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL].

(Reporting by James Davey; Editing by Mark Potter)