New chief likely to take Tesco back to its roots

Dave Lewis is expected to make far-reaching changes

When Dave Lewis takes over as chief executive of Tesco in October, following the sudden ousting of Philip Clarke last week, he faces the task of reviving Britain's biggest retailer. The supermarket chain is under siege from the German discounters, saddled with too many big stores and battling problems in its overseas operations.

Andrew Seth, author of The Grocers and Supermarket Wars, who worked with Mr Lewis at Unilever, says: "There is no question this fellow can be radical." The man responsible for Dove soap and Lynx deodorant is expected to spend his first months at Tesco listening. But Mr Seth is in no doubt Mr Lewis will make far-reaching changes. "He is a man of action," he says.

So just what action could Mr Lewis take to turn Tesco round?

During his three-and-a-half years at Tesco, Mr Clarke added in-house brands, such as Chokablok ice cream, and launched the Hudl tablet.


Some analysts, former insiders and business turnaround experts urge Mr Lewis to ditch distraction, and concentrate on the basics – price, service and stores. In short, Tesco should be doing a better job for customers.

Even the Clubcard loyalty card, central to Tesco for the past 20 years, and Tesco Bank , could be vulnerable. "Offer people something they want in . . food retail," said Bruno Monteyne, analyst at Bernstein. "Don't worry about their phone, tablet and video."

Then there are Tesco’s four corporate jets. The smart money would be on Mr Lewis offloading those too.

Even after pulling out of Japan, the US, and entering into a joint venture in China, Tesco still operates in 11 international markets.

Pruning the international portfolio is the path taken by Georges Plassat, the chief executive of Carrefour. But it is not just overseas that Tesco has superfluous assets. In the UK, it has over 3,000 stores, of which about 250 are large hypermarkets.

It has already set about shrinking stores, but could Mr Lewis go further? Jonathan Pritchard, analyst at Oriel Securities, said one of the problems facing the new chief executive is that there will be little appetite to take big box stores off his hands.

Any cash raised from selling international assets could be put into a war chest to cut prices. Analysts, former insiders and business turnaround experts say this should be Mr Lewis's first priority. One senior executive estimates that Tesco's price gap with Aldi could be as much as 20 per cent.

A radical solution would be to split Tesco’s business.

Mr Monteyne said this could mean operating a hard discounter in areas where price matters most, and upmarket stores in more affluent areas.

– (Financial Times)