Tesco’s chief executive, Dave Lewis, is quitting the retailer after overseeing a five-year turnaround from a financial crisis and accounting scandal that almost shredded the grocer’s blue chip reputation.
Lewis, 54, was parachuted in to run the UK’s biggest retailer in 2014 and his departure has come out of the blue. “My decision to step down is a personal one,” said Lewis, who made it clear he did not have another job lined up. “It is all consuming. The business never sleeps. It is 365 days, 24/7. I want to take some proper time out with my family and recharge my batteries. You pass this way only once.”
The former Unilever executive said he had completed a turnaround plan mapped out at the height of the crisis, when the supermarket issued five profits warnings in a year.
Lewis said he was leaving the company in a “position of strength”. He will be succeeded next summer by Ken Murphy, a Boots veteran who until recently was the chief commercial officer of its US parent, Walgreens Boots Alliance.
Tesco’s chairman, John Allan, said he had accepted Lewis’s resignation with regret. “Dave has done an outstanding job in rebuilding Tesco since 2014 and he continues to have unwavering support from the board,” Allan said.
Tesco shares, which had almost halved in the months before Lewis started his turnaround, have climbed 40% on his watch. However, the business is much smaller and less profitable than it was a decade ago, largely as a result of Lewis shutting down and selling operations and cutting prices to compete with Aldi and Lidl, and the shares are worth only 60% of their value of a decade ago.
Murphy, an Irishman, studied at University College Cork and qualified as an accountant. Allan described him as a seasoned leader with “deep commercial, marketing and brand experience within retail and wholesale businesses”. He will be paid a basic salary of £1.35m a year. Lewis earned £4.6m last year, with a basic salary of £1.25m and the rest from bonuses and incentive schemes.
The announcement of Lewis’s departure came as Tesco reported a 4% increase in pre-tax profits to £494m on sales of £28.3bn in the six months to 24 August. However, sales at established UK stores were down nearly 1% in the most recent three months, ending a long run of growth.
When Lewis – who earned the nickname “drastic Dave” for cutting jobs as part of his overhaul of Unilever’s UK business – took control the appointment was viewed as a risk because he had no retail experience. But he set about dismantling the old Tesco model, ending its combative dealings with suppliers, lowering prices and improving store standards. He also took the group into wholesale with the controversial £3.7bn take over of cash-and-carry group Booker. Thousands of jobs have also gone at head office and in store management, including a recent cull at Tesco Metro.
Lewis has always balked at the drastic epithet and said there were 222,000 people working in Tesco’s UK stores today, which was the same as when he took the helm. “I have never thought of myself that way [as drastic] and no one I have worked with has referred to me that way,” he said. Allan said it was last adjective he would use describe Lewis: “Determined maybe but not drastic.”
Shore Capital analyst Clive Black said Lewis had achieved a remarkable turnaround. “Put quite simply he is the bloke that saved Tesco,” said Black.
However, the independent retail analyst Nick Bubb questioned why Tesco had chosen another outsider. “What Dave Lewis will do next is unclear but the bigger question is why Tesco overlooked an array of internal candidates and have gone outside and appointed Ken Murphy from Boots (aka ‘Ken who?’) as the new boss,” said Bubb.
Lewis told the board he wanted to leave last year and Allan said internal candidates were considered but no one was experienced enough. Charles Wilson, the boss of Booker who was once regarded as the heir apparent, did not want to be considered. Wilson received treatment for throat cancer last year and has since recovered.
Murphy would inherit a company with “firm foundations and a competitive, sustainable growth strategy”, Lewis said.
Over the next three years, it intends to double the size of its £3.2bn grocery delivery arms by creating automated distribution centres in the back of stores. It will also open another 150 convenience stores. A subscription service for members of its Clubcard loyalty scheme, which gives them discounts in return for a monthly fee, is also being launched.
