Tesco looks like it has wind in its sails for first time in years

During the two years in which he has been chief executive of Tesco (Xetra: 852647 - news) , Dave Lewis has spent most of his time building bridges with customers and with suppliers, the former of whom had been deserting it and the latter of whom were feeling exceptionally bruised after continual duffings-up from the grocery giant.

On Tuesday, as the sharp rise in Tesco shares demonstrates, the turnaround moves on to its next phase - and it is the turn of shareholders to start feeling the love.

Mr Lewis' decision to target an operating margin of 3.5-4% by 2019-20, up from the present 2.2%, may sound like technical stuff of little interest to the millions of people who enter Tesco's stores each day. However, for investors, it is crucial.

It sends a message to them that Mr Lewis is confident the benefits of the recovery are here to stay. His two immediate predecessors, Sir Terry Leahy and Philip Clarke, also targeted operating margins. Under Sir Terry, that target was an industry-leading 6%, although it was reduced under Mr Clarke to 5.2% in early 2012 when he decided that Tesco needed to be investing more in its stores.

Yet even that target proved to be unsustainable as, amid an aggressive expansion by the German 'hard discounters' Aldi and Lidl, margins came under pressure right across the entire industry just at a time when households were seeing their disposable incomes coming under pressure in the aftermath of the global financial crisis.

Mr Clarke's attachment to the target, at a time when all grocers were forced to compete more on price to take on the Germans, forced him to beat up suppliers.

So today's re-imposition of a target for operating margins by Mr Lewis is incredibly important. It is his way of pointing out to the City that, after all the hard work during the last two years to regain the trust of shoppers and suppliers, Tesco will retain its financial discipline.

One of the greatest sayings in the UK grocery industry, coined by one of its legends, Sir John Sainsbury, was "sales for vanity, profits for sanity". In setting this target, Mr Lewis is showing that he will stick to that wisdom, flagging to investors that, while it remains vital for Tesco to carry on growing sales, that sales growth is not going to come at any cost and certainly not at a cost to the bottom line.

Tuesday's results also show that Tesco is gaining momentum. UK like-for-like sales growth - a comparison that strips out the effect of store openings, closures and refurbishments - has now been growing for two consecutive quarters.

Transactions and sales volumes are also up. And, for the first time since 2013, the value of UK food sales is also up.

At a time when there is still a lot of deflation in food prices, that is a clear illustration more people are shopping at Tesco once again, reflecting the work Mr Lewis and his team have done to be more competitive on pricing and to improve the group's fresh food offer.

It is also striking that, in spite of warnings across the industry that the age of so-called 'big box' retailing is over, Mr Lewis has on Tuesday flagged that all of Tesco's formats, including the much-maligned 'Extra' format, have seen an improvement in their like-for-like sales performance.

That is not to say Tesco does not have some ongoing problems. It still faces litigation from the accounting scandal uncovered by Mr Lewis shortly after he became chief executive.

The Serious Fraud Office is still investigating that scandal and a trio of former Tesco executives are facing criminal charges over it. The issue has the potential to embarrass the company in coming months.

Other headwinds include the company's pension deficit, which has more than doubled during the first half of the year from £2.61bn to £5.85bn, due to a collapse in gilt yields as a result of the Bank of England restarting quantitative easing.

That, if it forces Tesco to increase its contributions to the pension fund, may push into the future the date at which Tesco can resume paying dividends to shareholders. Operating profits are also going backwards in the group's international operations, due to intense competition in Poland and the Czech Republic, two of its biggest overseas markets.

And, of course, the competitive environment here in the UK also remains incredibly intense - with Asda, under its new chief executive Sean Clarke, expected to sacrifice its own 5% margin to try and recapture market share from the German duo.

But, for the first time in many years, it feels as if Tesco has the wind in its sails.

Watch Ian King Live Monday to Thursday at 6.30pm on Sky News.