Shares in Tesco slumped this week despite the company releasing its best results in seven years.
The UK’s biggest retailer announced a 30% rise in group operating profit to £1.28bn in the year to the end of February, and a 60% surge in the UK business profit to £803m.
But it still suffered the biggest fall in the FTSE 100 on Wednesday, with its shares finishing down more than 5%.
Chief executive David Lewis said the company had been trying not to pass on inflation to customers. He told media that a typical Tesco basket of goods now costs 6% less than when he took over the job in 2014.
But analysts expect supermarket chiefs to reverse two years of declining grocery prices, and anticipate this will lose them more customers to discount chains Aldi and Lidl, which thrived during the last recession.
Tesco, which controls almost 28% of the UK grocery market, has now managed its first full year of growth since the 2009-10 financial year, with like-for-like sales up 0.9% thanks to a focus on lower prices and better customer service.
Ahead of Tesco releasing the results on Wednesday, the Reputation Institute announced that the company now scores 72 out of 100 on RepTrak, the reputational league table, up from 64 in 2016.
RepTrak is based on public perceptions of a company’s “ability to deliver on stakeholder expectations across seven dimensions: products and services, innovation, workplace, governance, citizenship, leadership and performance”, according to the Institute.
Tesco’s reputation nose dived in 2014 when £250m of irregularities was discovered in its accounts. The revelation led to a halving of its market value in a year, since when it has agreed to pay a fine of £129m to settle a Serious Fraud Office investigation and has also struck an £85m deal with the Financial Conduct Authority to compensate affected shareholders.
Commenting before Tesco’s latest results were released, James Bickford, Managing Director, Reputation Institute said: “Tesco is no stranger to a crisis, but since David Lewis’ appointment as chief executive in 2014 its reputation has recovered at an impressive rate.
“It is clear from the RepTrak outcome that stakeholders value Tesco’s approach to governance and citizenship, which could be due to the direct approach the company has taken in mitigating the risks encountered due to the accounting scandal.
“With the fines paid and compensation for stakeholders agreed, Tesco will soon see the end of this particular crisis, and looks to maintain its spot as one of Britain’s, and the world’s, largest retailers.”
But while memories of the accounting scandal may be fading, the more recent infamy of a data breach at Tesco Bank could take longer to erase.
Late last year the bank, which has over seven million customer accounts, had to freeze its online operations after as many as 20,000 customers had money stolen from their accounts.