Dave Lewis, the Tesco CEO that joined the company in 2014 to oversee its turnaround has announced that goal has been achieved and with it the conclusion of his tenure at the head of the company. Mr Lewis has compared the situation of the company when he took over as to being in ‘intensive care’. He says that the fact that the company is now ‘healthy’, a description backed up the accompanying release of first half results that showed 11% growth in operating profits, means that the job he was hired for has been completed.
It emerged that Mr Lewis announced his intentions to the Tesco board as long as a year ago, based on his expectation that the supermarket chain would have returned to growth by this year. That forecast turned out to be accurate. As well as the 11% growth in operating profits to £1.13 billion over the first half of the year, pre-tax profits also grew by a healthy 6.7% to £494 million. The improvements to the bottom line came despite like-for-like sales over the period remaining flat – up a fractional 0.1% across the group, including its businesses in Thailand and Poland.
Despite an early morning drop of 1% to the Tesco share price following the announcement, it since recovered to a gain of around 1.65% by mid-morning. Investors are presumably reassured by the smooth succession planning, with Mr Lewis’s replacement already secured. It was decided that other senior management figures at the company were still “3 or 4 years away from being ready for a chief executive role”.
It was also confirmed that Charles Wilson, the CEO of the wholesaler booker Booker that Tesco acquired for £4 billion last spring, asked not to be considered for the position many believed he was seen as succeeding. While Mr Wilson is again “fit and well”, health issues saw him step back from his job last year. He’s now back in the saddle and “doing an absolutely fabulous job” in the words of Tesco chairman John Allan. But decided he did not want, at least at this moment in time, to be in the frame for the top job.
Instead, the new CEO will come from the outside. The man appointed is Ken Murphy who moves on from his most recent role as a consultant to Walgreens Boots Alliance. His earlier career was spent at fast moving consumer goods giant Proctor and Gamble.
Tesco’s plans for continuing growth include doubling its online sales capacity with 25 new “urban fulfilment centres” that will improve logistics delivery opened over the next 3 years. A new subscription “Clubcard Plus” service will also be launched and Booker is to acquire the restaurant supplier Best Food Logisitics for £1 billion. Best Food counts KFC and Pret a Manger among its clients.
Tesco investors will hope that Mr Murphy will be able to carry on where Mr Lewis leaves off. The change seems well planned and notably amicable with Mr Lewis summarising:
“I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton. I have enjoyed it, it is addictive, it has been challenging and all-consuming and I will take time out with my family, recharge my batteries and think about what I might want to do next.”
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