Tesco Plc shares extended their decline in early London trading as chief executive officer Dave Lewis began his new job amid a report that investor Harris Associates has slashed its stake in the UK’s biggest grocer.
Tesco was unable to immediately confirm the report in The Sunday Telegraph that Harris cut its holding to 1 per cent from 3 per cent. The newspaper cited the investor’s chief investment officer, David Herro.
The shares fell 1.7 per cent to 226.15 pence at 9.36 a.m. They slid 6.6 per cent on 29 August after the supermarket operator said that it plans to slash its dividend and reduce investment, while forecasting lower profit than analysts estimated. The grocer also announced that former Unilever executive Lewis will start a month earlier than originally planned.
Lewis is moving from 'head of Unilever personal care to CEO of Tesco intensive care', John Kershaw, an analyst at Exane BNP Paribas in London, said in a note today. He will need to 'articulate what Tesco stands for, fix its price problems and reconnect with disaffected customers', Kershaw wrote.
Lewis replaces Philip Clarke, who, in 3 1/2 years as CEO, failed to stem Tesco’s decline in market share as customers defected to discounters Aldi and Lidl and the upscale Waitrose chain. Clarke spent more than £1 billion pounds ($1.7 billion) on refreshing hypermarkets, developing an online media strategy and introducing technology products such as the Hudl tablet.
Tesco had its worst sales decline in more than two decades in the 12 weeks ended 17 August, as revenue dropped 4 per cent and market share fell 1.4 percentage points to 28.8 per cent, Kantar Worldpanel data showed last week. Aldi and Lidl maintained record shares of 4.8 per cent and 3.6 per cent, respectively.
To get customers back, Lewis will need to deliver “amazing prices, amazing quality and services, but not necessarily in the same store”, according to Bruno Monteyne, a former Tesco executive now working for Sanford C. Bernstein in London. Tesco’s size lends itself to breaking up the estate into low-cost and more upscale stores, Monteyne said.
Bloomberg News, edited by ESM
