By Geoffrey Smith
Investing.com -- The man who saved Tesco (LON:TSCO) is leaving.
Dave Lewis said Wednesday he’ll step down in summer next year, nearly six years after taking over as chief executive when the U.K.’s largest food retailer was reeling from a false accounting scandal.
He called the decision "a personal one,” in a statement accompanying the supermarket chain’s latest earnings which – true to form - revealed a 3.7% increase in currency-adjusted profits in the first half of its fiscal year, along with a sharp dividend hike, a doubling of cash flow from retail activities and a further reduction in net debt.
Lewis took over with Tesco’s share price languishing at the lowest in decades, its foreign operations a hot mess and its U.K. market share under pressure from pushy German discounters and online startups such as Ocado (LON:OCDO).
He never quite stopped the bleeding – Tesco’s market share of 26.9% in the 12 weeks through Sept. 8 is still down a couple of points from when he took over, and there is no sign of Aldi and Lidl going ex-growth yet. But there is no exaggeration in his statement Wednesday that: ““Our turnaround is complete, we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering. The Tesco (LON:TSCO) brand is stronger and customer satisfaction is the highest it has been for many years.”
While the 31% increase in the share price during his reign may not seem extreme, the wonder is that it happened it all, given the competitive environment and the relentless squeeze on U.K. consumer finances from Brexit, which has caused the U.K. to go from the top of the G7 growth league in 2015 to the bottom in 2018. No wonder that chairman John Allen said in the same statement that he accepted the resignation “with regret”.
Another aspect of the departure is the relatively smooth succession planning. Lewis is staying around until summer 2020, giving his designated successor Ken Murphy, a veteran of Walgreens Boots Alliance (NASDAQ:WBA), plenty of time to acclimatize.
That (along with the results and the dividend hike) helps to explain the stock’s 1.8% rise on a day when the FTSE 100 is down 1.5% and the rest of Europe is also in the red. The Stoxx 600 was down 1.2% and the German DAX down 1.1% by 5 AM ET (0900 GMT).
It also means that Lewis will still be at the helm over what is set to be a tumultuous few months for Tesco (LON:TSCO), given the risk of a disorderly “No-Deal Brexit” at the end of the month or, perhaps, a couple of months later after a General Election. The erection of new border checks at U.K. ports is set to cause acute disruption to supplies of fresh food in particular, according to the British Retail Consortium, which said last month that government claims to the contrary are “categorically untrue”.
“Retailers will be preparing for Christmas, stretching already limited warehousing capacity, and the U.K. will be importing the majority of its fresh food from the EU, magnifying the impact of border delays,” the BRC said at the time. The Food and Drink Federation also predicts “significant and adverse changes to product availability, and random shortages” after a No-Deal Brexit.
“I will give the job everything I have until my very last day,” Lewis said, and Tesco (LON:TSCO) shareholders can be thankful for that. For Lewis, there’s the consolation that, whatever chaos Brexit brings, it will all be someone else’s problem before too long.