CEO of U.K. Grocery Giant Tesco to Step Down -- Update

Date : 10/02/2019 @ 10:26AM
Source : Dow Jones News
Stock : Walgreens Boots Alliance Inc (WBA)
Quote : 62.14  0.2 (0.32%) @ 4:59AM
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CEO of U.K. Grocery Giant Tesco to Step Down -- Update

Walgreens Boots Alliance (NASDAQ:WBA)
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By Saabira Chaudhuri 

LONDON -- The head of one of the world's largest grocery chains, Tesco PLC, is stepping down, handing the reins to a top executive at pharmacy giant Walgreens Boots Alliance Inc.

U.K- based Tesco said Chief Executive Dave Lewis will be replaced next summer by Ken Murphy, Walgreens's chief commercial officer and its president of global brands.

The 54-year-old Mr. Lewis is widely credited with turning around Tesco's performance after taking the helm five years ago, following an accounting scandal and a bruising market-share battle in the U.K. with discounters.

The first outsider CEO in Tesco's history, he was hired from Unilever PLC, the owner of brands like Dove soap and Ben & Jerry's ice cream, and a huge Tesco supplier.

He slashed prices, put more staff on shop floors and sold noncore businesses and international units to focus on Tesco's home market. In his first year on the job, Tesco reported the biggest loss in its history as Mr. Lewis logged a string of impairments.

Gradually, though, performance stabilized. Bernstein analyst Bruno Monteyne pointed to Tesco's volume growth, better-than-expected margin growth and strong cash generation.

Punctuating the turnaround effort, Tesco said Wednesday its pretax profit rose 6.7% in the first half of fiscal 2020. Investors cheered, sending shares up 2%. For the six months ended Aug. 24, Tesco said pretax profit was GBP494 million ($606.6 million) compared with GBP463 million in the same period last year. Adjusted operating profit -- a metric closely watched by analysts which excludes exceptional items and other one off items -- was GBP1.41 billion in the six months to Aug. 24, up from GBP1.12 billion the previous year.

"The company could not have delivered any stronger on the recovery investment thesis," said Mr. Monteyne.

During his tenure, Mr. Lewis also bought the U.K.'s largest food wholesaler Booker Group PLC for GBP3.7 billion in 2017. He revamped Tesco's online offerings and launched a discount chain to compete with German discounters Aldi and Lidl, two chains that had started taking market share from Tesco and Britain's other established grocery chains.

He also notably took on his previous employer Unilever, pulling its products off shelves in a high-profile pricing spat dubbed "Marmitegate" by the British press. Mr. Lewis refused to raise prices on products like Marmite -- a salty yeast-based breakfast spread beloved by Britons -- despite a sharp drop in the pound. Sterling's slide in the wake of a 2016 referendum in Britain to break with the European Union sent import costs soaring. Unilever products eventually returned to Tesco's shelves.

Britain's highly consolidated grocery market is among the world's toughest and most competitive, setting up a challenge for Mr. Murphy. The 52-year-old, who hails from Cork in Ireland, headed up commercial strategy for Walgreens Boots's health-and-beauty division and was joint chief operating officer at Boots for the U.K. and Ireland before his current role. He will arrive at Tesco as Aldi and Lidl continue to step up their assault on the U.K. market and as Amazon.com Inc. increases its focus on the grocery industry. Amazon's Whole Foods has a limited footprint in the U.K.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

 

(END) Dow Jones Newswires

October 02, 2019 06:11 ET (10:11 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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