With Tesco’s profits up but facing an “uncertain market”, has Dave Lewis saved the supermarket?
John Ibbotson, director of retail consultancy Retail Vision, says Yes.
Yesterday’s fall in Tesco’s share price should be taken with a Value sack of salt. Chief executive Dave Lewis is achieving an extraordinary feat, turning around an oil tanker in a very tight spot. With Tesco hemmed in by ruthless competition and food price deflation, it’s a delicate manoeuvre that requires both skill and vision. The turnaround is painfully slow, but for Tesco to have begun its pivot without hitting the rocks is a huge achievement. For a brand that last year posted the largest ever loss on the UK high street, the return to sales growth for the first time in three years is truly a transformation. The challenge for Tesco now is to keep its momentum and shore up market share. The company’s vast size is an advantage, as it allows the fallen giant to keep down prices for longer than its rivals. In the current war of attrition, this could prove decisive. Lewis has made some tough decisions, stopped the rot and halved the decline in Tesco’s market share. Given the huge challenges he faces, his performance looks little short of visionary.
Crawford Spence, professor of accounting at Warwick Business School, says No.
Since his appointment in 2014, Dave Lewis has managed to bolster his reputation without necessarily saving his own organisation from terminal stagnation. In this respect, he has played a crafty game, bringing to light lots of bad news about profit overstatements and the bullying of suppliers as soon as he took over. This has had the effect of making his predecessors look bad, and has allowed him to position himself as a “turnaround” chief executive, now that the company is making money again. However, closer analysis shows that Tesco’s profits are quite modest in comparison to those of its rivals Sainsbury’s and Asda. And the overall strategy of cost reduction is hardly a visionary change of direction for a large supermarket chain. This is a view apparently shared by the market as well, as was indicated by the 7 per cent drop in its share price following the announcement of its results yesterday. In short, Tesco may be back, but not with a bang.