New Tesco chief executive Dave Lewis takes charge at the ailing grocery giant today, tasked with reviving its fortunes amid a vicious price war and dissent from shareholders.
Mr Lewis has been rushed into the role a month earlier than planned, after the supermarket warned on Friday that profits for the year would be lower than expected and slashed its dividend payout to investors by 75 per cent.
The profit warning, its third of the year, led chairman Richard Broadbent to call time on the final days of ousted chief executive Philip Clarke, speeding up the arrival of Lewis, who was poached from consumer goods giant Unilever.
It emerged yesterday that major shareholder Harris Associates had reduced its stake in the UK’s largest retailer from more than 3 per cent in June to around 1.4 per cent, claiming the “risk factors” were too high to invest in the supermarket.
Tesco has been embroiled in a fierce price war as shoppers turn to traditional foes including Asda and Morrisons and rapidly growing German discounters Aldi and Lidl.
Mr Lewis is tasked with re-connecting Tesco with British households by lowering its prices, improving tired stores and battered brand image.
Mr Lewis – the outsider to run the business – is also expected to bolster his senior management team and address its struggling overseas arm which has been impacted by squeezed spending in the Eurozone.
Bruno Monteyne, an analyst at Bernstein Research and former Tesco executive, said the firm has “brought forward the bad news” and instilled a sense of urgency to its fight back.
He said: “The current strategy, 'trying to be slightly better at everything without being great, isn't working.”
In an open letter to Mr Lewis, he said: “You've got by far the best retail assets in the UK, but stop fighting yesterday's battle.”
Shore Capital analyst Clive Black said: “It has lost its relationship with the British household. Price isn’t the only factor, but he has to get it right first to take advantage of its other qualities in online, food and fuel.”
Tesco has suffered in the last four years as shoppers have increasingly shunned its large, out-of-town stores, preferring to shop for smaller amounts locally and buy large, non-food items online.
Mr Clarke, who had taken on the mantle of former boss Sir Terry Leahy after a glittering 14-year tenure at the top, had been attempting to address these issues by installing restaurant and coffee brands Giraffe and Harris + Hoole into shops, adding more store staff and investing in technology ventures.
Mr Clarke also scrapped the familiar blue and white stripes of its basic Tesco Value range and ditched his predecessor’s lossmaking US venture, Fresh & Easy. He leaves the business after 40 years in which he worked his way up from stacking shelves in his native Liverpool.
However, profits have continued to fall and Broadbent has indicated spending on Mr Clarke’s projects will be slowed.