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Tesco’s strong interim results this week (£1.4bn profits beat analyst consensus by 9%) were overshadowed by the surprise announcement that CEO Dave Lewis will step down next summer to be replaced by Boots veteran Ken Murphy.
Lewis’ “personal” decision to quit after five years at the helm of the UK’s biggest supermarket sent shockwaves through food & drink, with analysts mourning the departure of the man who led Tesco’s turnaround after inheriting the business at a disastrous time amid profit warnings, spiralling debt and a major accounting scandal.
However, during his five-year tenure the City has not shown a lot of generosity towards Lewis’ strategy, despite strong evidence that he has delivered. When Lewis joined on 1 September 2014, Tesco’s shares were trading at around 225p. They quickly fell to a low of 164p as news of the accounting scandal broke. Today? The stock hovers around 240p, up 7% or 46% depending on your base. But investors responded surprisingly calmly to news of his departure, with shares falling 0.7% early morning.
Shore Capital analyst Clive Back said: “Lewis’ departure will need to be absorbed by the market, the disappointment of his chairman is palpable, but put quite simply he is the bloke that saved Tesco, which should go down as an enormous achievement in British retail history. He will also, undoubtedly, be a loss to the group.”
Russ Mould, investment director at AJ Bell, said Lewis deserved “three cheers” for having stopped Tesco from “sinking into a deep hole”.
He added: “He has made some very difficult decisions which, while painful, have put the supermarket back on track. It is clear that Lewis has been a man who has constantly rolled up his sleeves and explored every possible avenue to sharpen Tesco’s proposition.”
Tesco (TSCO) shares opened 0.8% lower at 234.50p.
Morning update
In this week’s edition of The Grocer read about a legal spat between Red Bull and energy drinks startup Brain Füd over a trademark infringement, the fundraising of fresh sauce startup The Saucy Affair and boxed-wine business BIB. Furthermore, sales rose at smoothie maker Innocent but slumped at Whitworths amid a significant turnaround.
Check out thegrocer.co.uk/finance for all the details this morning.
On the markets this morning, the FTSE 100 has opened the session in the green after four days of sliding, up 0.2% at 7,093.35pts.
Early risers include Ocado (OCDO) up 1.5% at 1,267.50p, Just Eat (JE) up 1% at 638p and Glambia (GLB) up 0.8% at 11.13p.
Imperial Brands (IMB) was among the fallers, down 0.7% at 1,826.60p. Also down, Marks & Spencer (MKS) opened 1.5% lower at 176.25p.
Yesterday in the City
London’s blue-chip index ended Thursday’s session in the red, down 0.6% at 7,077.64pts as fears the UK is about to enter its first recession since the financial crisis escalated.
Amid a wide array of fallers, British American Tobacco (BATS) closed 3.6% lower at 2,793.53p, Sainsbury’s (SBRY) was down 2.9% at 208.30p and Ocado dropped 2.7% to 1,249.50p.
Meanwhile, closing in the green Diageo (DGE) was up 1.8% at 3,276p, Associated British Foods closed 1.5% higher at 2,192p and Imperial Brands (IMB) finished at 1,837.60p - up 0.4% following news that CEO Alison Cooper is to step down.
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