When Dave Lewis was appointed chief executive at Tesco (LSE: TSCO) in July 2014, the stricken supermarket was crying out for strong management, and that’s exactly what it has got.
The UK’s largest grocer was in dire straits after predecessor Philip Clarke’s disastrous rein, and Lewis got brownie points just for being a new broom. He’s since earned those points for the unsentimental way in which he’s cleaned out Tesco’s dirty nooks and crannies.
Call me Dave, you’re fired
Lewis quickly convinced markets that he understood the scale of the challenge ahead of him, ruthlessly shutting stores, closing the HQ, junking private jets, culling 10,000 jobs, terminating the final salary pension scheme, offloading BlinkBox and slowing the dash for convenience stores. There was none of Clarke’s airy nonsense about making Tesco a destination, by adding artisan coffee shops and family friendly food chains. Instead he set about making it a profitable business.
Any newbie chief executive knows he has only a short-lived window when he can justifiably blame all of the company’s problems on its former boss, and Lewis leapt through it, taking control of the Tesco accounting scandal, which saw the retailer admitting it overstated its profits by £250m. Markets also gave Lewis the benefit of the doubt when he announced a stunning £6.4bn pre-tax loss in April last year, the largest ever by a UK retailer. But from that day it has been clear that all bad news belongs to him.
Fair share
And rightly so, after all, Tesco paid Lewis £4.6m last year, his reward for turning that £6.4bn loss into a pretax profit of £162m in the year to 27 February. Earlier this month Tesco posted a third successive quarter of improving sales trends, and a 60% rise in operating profits to £596m. Today, figures from Kantar Worldpanel show Tesco boosting market share for the first time in five years, if only by 0.1%, lifting its share to a dominant 28.2%. By contrast, Sainsbury’s posted a 0.4% fall in sales, and Morrisons posted a 3% drop.
Separate figures from Nielsen show Tesco enjoying its best year-on-year sales figures for over three years, with a 1.4% increase in the 12 weeks ending 8 October. UK head of retailer and business insight, Mike Watkins said: “Tesco was the only one of the ‘Big Four’ to see a year-on-year increase and has started to attract new shoppers again, with two-thirds of households visiting them in the last four weeks.” Two-thirds, you say?
My Mate, Dave
Finally, Lewis played a blinder in Marmite-gate, giving former employer Unilever a sound thrashing into the bargain. This is the best publicity Tesco has had in years, establishing itself as the customers’ friend and protector. It may even silence longstanding customer grumbles about prices and service.
Investors are starting to reap the rewards: today’s share price of 207p is only 7p below the year high, and more than double its 52-week low of 137p. Brexit Britain will remain a tough place for supermarkets but Lewis has put Tesco in a much stronger position.
