Dave Lewis, named chief executive officer when Philip Clarke was ousted last month, will step into the job next week, one month earlier than planned. Tesco cut its dividend by 75 percent, reduced capital spending plans by 16 percent and forecast profit this year of no more than 2.5 billion pounds ($4.2 billion), compared with the 2.7 billion pounds estimated by analysts.
Tesco, the destination for one in
every seven pounds spent by Britons, has lost share under Clarke’s tenure as shoppers defected for deals at the discounters and better quality at the upscale chains. Today’s measures are designed to give Lewis, who Tesco said will consider all options for creating value, the cash reserves needed to turnaround the business, said a person familiar with the company’s strategy.
“This shows us Lewis is already working behind the scenes and he wants to get all the bad news out first,” said Bruno Monteyne, an analyst at Sanford C. Bernstein in London. “Things are bad and he is creating a sense of urgency, that way when he presents his new strategy later on, nobody will get upset about the dividend cut.”
A customer pushes a shopping cart past signs displaying goods at reduced inside a Tesco... Read More
Share Decline
The shares traded 6.1 percent lower at 231.25 pence as of 9:37 a.m. in London. The intraday decline was the steepest since Jan. 12, 2012, the day Tesco cut its profit outlook. The stock has dropped every year of Clarke’s tenure, leaving the company with a market value of 18.7 billion pounds.Tesco will reduce spending in areas including information technology and the store refurbishments. Under Clarke, who will step down from the board as Lewis joins, the company spent more than 1 billion pounds to remake stores, adding children’s playgrounds, artisan bakeries and Zumba dance classes to lure back customers. Clarke also spent on building a technology ecosystem of tablets and online media to try to lock customers in.
That failed to stem the decline: Tesco had its worst sales drop in more than two decades, when revenue dropped 4 percent in the 12 weeks to Aug. 17, Kantar data showed this week. Meanwhile, Aldi and Lidl have maintained their record shares of 4.8 percent and 3.6 percent respectively, thanks to the half of U.K. households who shopped at either outlet.
Dave Lewis, incoming chief executive officer of Tesco Plc.
Turnaround Scope
Today’s dividend cut “suggests that the board is giving Lewis scope to meaningfully cut the U.K. margin to turnaround the business,” said John Kershaw, an analyst at Exane BNP Paribas. Tesco may also be signaling a review of the company’s international operations.Clarke, who took over from Terry Leahy who ran the business for more than a decade and led the company’s expansion overseas, exited businesses including the U.S. and Japan while CEO and folded the company’s Chinese operations into a joint venture. Tesco still sells groceries in markets including South Korea, Turkey and Poland.
“The current strategy -- trying to be slightly better at everything without being great -- isn’t working,” said Bernstein’s Monteyne. Despite the measures taken, “it is too early to call the bottom.”
No comments:
Post a Comment