Six of the best – and worst – for Dave Lewis and Tesco
The chief executive has announced he is leaving the supermarket – to rave reviews – after just six years.
Tesco chief executive Dave Lewis has announced he will leave the company.
The PA news agency takes a look back at his biggest achievements and challenges.
– Dave Lewis arrives at Tesco
Dave Lewis was unveiled as the new chief executive of Tesco in 2014 – the first time the supermarket appointed an external candidate to the top job.
His first job was to sort out years of underinvestment in the UK division by predecessors Phil Clarke and Sir Terry Leahy, who increasingly focused on overseas expansion.
Mr Lewis would later describe Tesco as a patient in intensive care, after booking a £6.4 billion annual loss in 2015 – one of the biggest in UK corporate history.
Some industry observers suggested his lack of retail experience could hold him back, but Mr Lewis attempted to prove them wrong.
– Accounting scandal
Within weeks of starting, Mr Lewis was informed by a whistleblower that there had been a £325 million profits overstatement.
The issue centred around profits from suppliers being banked before the money had reached Tesco. The toxic relationship between suppliers and Tesco was laid bare and Mr Lewis vowed to overhaul the systems.
Under Mr Clarke, Tesco was pushing suppliers for heavy discounts and cash incentives for prominent positioning in stores to improve its balance sheet. The extra money was contingent of Tesco hitting sales targets but when they were missed, a black hole in the accounts was created.
The Serious Fraud Office (SFO) became involved and although no-one was ever held responsible, in 2017 Tesco signed a deferred prosecution agreement with the SFO to avoid a possible corporate prosecution. The company paid a £129 million fine and £85 million compensation to investors.
Using his expertise as a supplier at Unilever, one of Mr Lewis’s biggest changes was the relationship between Tesco and suppliers. He threw out dozens of different negotiating positions the grocer had previously adopted, and introduced a cleaner structure with just a handful of different types of contracts. Arguably one of his biggest achievements was resetting relations with suppliers.
He also introduced what became known as the “fake farm” brands – a rebranding exercise for Tesco’s Everyday Value range which saw the famous blue and white stripes replaced with friendly names such as Redmere, Boswell and Woodside farms.
Rivals scoffed privately and the farmers’ union complained, but only last week Sainsbury’s announced it would be rolling out more of its own made-up brands to replace its Basics labelling.
Mr Lewis was quick to start simplifying stores and cutting back on the huge range of products available. He also invested millions in cutting prices – moving away from Mr Clarke’s push for higher profit margins and spending around a year selling products at a loss to bring shoppers back to his stores.
International expansion was significantly slowed, with overseas operations, including Turkey, sold off. He also scrapped “non-core” assets bought by Mr Clarke, including the Giraffe restaurant chain, Harris+Hoole Coffee shops, online video service Blinkbox and the Tesco Hudl tablet.
More recently, he embarked on a major overhaul of stores, including significant changes to its Metro stores – which are bigger than Express ones, but smaller than its supermarkets. Earlier in the year, some in-store services such as delis were cut.
Job cuts have been fierce, with 9,000 announced in January and a further 4,500 in October. Mr Lewis insisted the company still employs the same number of staff in the UK – 220,000 – although many have seen their roles change.
He also attempted to take on Aldi and Lidl directly with the opening of 10 Jack’s stores – emblazoned with Union Jacks, in an apparent dig to its German rivals. One site has already been earmarked for being turned into a Tesco, although this was a larger site than the other Jack’s.
One of Mr Lewis’s boldest moves was snapping up the UK’s biggest wholesaler Booker in 2018 for £3.9 billion. The deal looked like it might not make it when the Competition and Markets Authority took a close interest, with heavy lobbying from rivals against the tie-up. It saw Booker boss Charles Wilson – seen as one of the smartest brains in retail – join Tesco as UK chief executive.
Subsequently, rival Morrisons has increased its own wholesale position, building closer ties with Amazon and supplying stock to convenience store operator McColl’s.
Co-op also got involved in the wholesale world, with a £143 million deal to buy the Nisa convenience store chain, supplying Co-op products to the sites.
– Unfinished business
Analysts and commentators were full of praise for Mr Lewis and his turnaround of Tesco.
Clive Black, retail analyst at Shore Capital, said: “Put quite simply, he is the bloke that saved Tesco, which should go down as an enormous achievement in British retail history.”
But unease remains on just where Tesco goes next and whether new boss Ken Murphy can take the grocer into the future.
Julie Palmer, partner at Begbies Traynor, said: “Whatever the next steps, he (Mr Murphy) will have a difficult time following a CEO that made bold decisions and was willing to go back and pull apart his own ideas if they weren’t working, such as switching one of his Jack’s stores – designed to combat the fast growth of discount rivals – into a regular Tesco.”