You’ve heard of the Shareholder Spring; we might just be seeing the start of the Shareholder Summer. Following endless speculation and increased pressure from frustrated investors, CEO Philip Clarke has finally announced that he is to step down from his role at Tesco (LSE: TSCO), to be replaced by Dave Lewis, currently president of Personal Care at Unilever (LSE: ULVR) (NYSE: UL.US).
The announcement came alongside a profit warning for the supermarket, with management claiming a weak market combined with “the increasing investments we are making to improve the customer offer and to build long term loyalty” has led to them revising down expectations for first-half sales and trading profit.
Yet in early trade, Tesco’s shares rose (by 3.5%) — usually, in a situation where a company’s CEO steps down and it issues a profit warning, investors would expect to see an immediate decline in the share price. But this appears to suggest that Clarke wasn’t a popular figure at the head of Tesco, despite having 40 years’ of experience with the company, since joining the supermarket as a teenager and working there part-time until he entered its Management Training Programme after graduating from university.
Clarke will hand over the reins to Lewis on 1 October, but will remain available to support the transition until the end of January 2015. Mr Lewis has formed ties with the supermarket from his role at Unilever, with Tesco chairman Sir Richard Broadbent commenting: “Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development. “
Lewis will receive a basic salary of £1.25m, restricted Tesco awards of “equivalent expected value” in lieu of and in line with his deferred share awards from Unilever, as well as “standard benefits commensurate with his position” and £525,000 in lieu of his current-year cash bonus from Unilever.
So will Lewis’s appointment mark the beginning of the turnaround that many investors have been waiting for? Only time will tell, although the market’s reaction this morning reflects the already-improved sentiment towards the supermarket giant. Let us not forget, either, that Tesco is the market leader in its sector, and offers a FTSE 100 avg.-beating yield of over 5%.
