Tesco boss to leave next year after turnaround

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Dave Lewis, Tesco CEO -- REUTERS

LONDON — Tesco boss Dave Lewis will step down next summer after declaring the turnaround of the UK’s biggest retailer complete, handing over to Ken Murphy, a former executive at health care group Walgreens Boots Alliance.

Celebrating its 100th anniversary, Tesco, which has a 27.4% share of Britain’s grocery market, is five years into a recovery plan that Lewis launched after a 2014 accounting scandal capped a dramatic downturn in trading.

Murphy will become the second outsider to lead Tesco, following in the footsteps of former Unilever executive Lewis. And like Lewis, the 52-year old Irish national also has experience in the consumer goods industry — key suppliers to supermarkets — having started his career at Procter & Gamble.

“Now is the right time for me to pass on the baton, our turnaround is complete,” Lewis told reporters on Wednesday.

“We’ve delivered all the metrics we set for ourselves, the leadership team is very strong, our strategy is clear and it is delivering,” he said, adding he was not leaving for another job.

The announcement of Lewis’s departure came as Tesco beat forecasts with a 25% rise in first-half operating profit before one of items of 1.4 billion pounds ($1.7 billion) and hiked its interim dividend 58.7%, underlining the progress he has made.

Shares in the group were up 1.8% at 0900 GMT.

Tesco was on its knees when Lewis joined, but has since met all his turnaround goals, including a key margin target of earning between 3.5 pence and 4 pence of profit for every pound customers spend. The first half profit margin was 3.67%.

“Put quite simply he is the bloke that saved Tesco, which should go down as an enormous achievement in British retail history,” said Shore Capital analyst Clive Black. “Murphy has big shoes to fill.”

Tesco shares have risen 6% since Lewis started in September 2014, while the FTSE 100 index had risen 8.5% in the same period. Lewis, however, noted that Tesco’s share price had increased about 40% since October 2014 when the group reported the full extent of the accounting irregularities.

Lewis overhauled Tesco’s relationship with suppliers, lowered prices versus competitors, simplified product ranges and improved store standards. Jobs have also been cut, including 4,500 announced in August.

The 54-year-old also pursued growth by buying wholesaler Booker for nearly 4 billion pounds, forming a global purchasing alliance with Carrefour and launching a new discount format called Jack’s.

Tesco chairman John Allan said Lewis had indicated to him a year ago of his plan for a 2020 departure, kicking off a succession process that also considered internal candidates.

He said Charles Wilson, the boss of Booker who was once seen as the frontrunner to succeed Lewis, did not want to be considered for the job. — Reuters