The chief executive of Tesco has announced he is stepping down next year – in a move that shocked the retail sector.
Dave Lewis led a turnaround of Britain’s biggest supermarket chain after taking the helm in 2014, by cutting prices, slashing thousands of jobs, merging with wholesaler Booker, and simplifying the product range.
“We have now delivered every element of the turnaround plan,” Mr Lewis said on Wednesday. “With the turnaround complete and as we begin to implement the next steps of our sustainable growth strategy, now is the right time to plan a smooth and orderly succession. As such, I will step down as group CEO next summer.”
He cited personal reasons for the decision.
Ken Murphy, who has built up his career at health and beauty retailer Boots, has been appointed as his successor.
Tesco chair John Allan said Mr Lewis told him “some time ago” that he was considering the best time to pass the baton.
“His openness allowed me to begin a thorough and orderly process to identify a potential candidate to replace him,” Mr Allan said.
Mr Lewis is credited with steering the supermarket chain through an accounting scandal in 2014 and a subsequent pre-tax loss of £6.4bn – the biggest ever suffered by a UK retailer.
Also on Wednesday, Tesco said sales in the first half of its financial year dropped 0.4 per cent. Tesco attributed most of the decline to subdued market growth in the UK and Ireland, especially in recent months, and to an unfavourable comparison with a year ago when sales were boosted by hot weather, the World Cup and the royal wedding.
However, profits still rose strongly.
“This is largely due to cost-cutting,” said Neil Wilson, chief market analyst for Markets.com.
“But it’s a big blow for Tesco to lose Lewis ... It’s hard to underestimate the impact Lewis has had on Tesco, as he turned the supertanker around after a run of poor results and an accounting scandal.
“Ken Murphy has solid pedigree, coming from Walgreens Boots Alliance, a retailer that understands cost-cutting. He’ll need to employ these skills at Tesco where he’ll have to contend with tougher organic comparisons post the Lewis era. Moreover, the battle with the discounters is only just starting.”
Low-price supermarkets Aldi and Lidl are rapidly attracting new shoppers throughout the UK, threatening Tesco’s dominance of the grocery market.
Tesco’s shares fell when the market opened an hour after the announcement but later reversed losses, trading 1.7 per cent higher on the day by 9:15am.
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