Tesco celebrates profit uplift as CEO announces departure & successor

Tesco has reported positive interim results and announced that CEO Dave Lewis will be stepping down next year with Ken Murphy appointed as successor.

Group operating profit stood at £1,406m, +25.4%, margin 4.41%, up 87 bps. For the UK and ROI, there was significant improvement £1,085m, up 28.4% - driven by space right-sizing, cost savings and improved product mix.

As a result of lowering build costs, reducing operating costs and improvements in margin, Tesco is to open 150 Express stores in the UK, over the next three years, as well as 4 new superstores in UK & ROI.

The group is to open three Urban Fulfilment Centres by Summer 2020 (incl. first in West Bromwich by March 2020) as part of plan to open more than 25 over the next three years.

Regarding Booker, Tesco will be building on the organic growth since merger (£0.7bn additional sales to date), and has announced it has acquired Best Food Logistics, adding a further £1.1bn additional foodservice sales. Best Food Logistics distributes food to customers including Pret a Manger, KFC and Burger King.

Dave Lewis, Chief Executive, said, 'Despite challenging external conditions we have delivered a very good start to the year. I’m very pleased to say that we have now delivered every element of the turnaround plan and from this position of strength, the transformation of our business continues at pace.

'The Capital Markets Day in June laid out many opportunities for further, profitable growth and I’m delighted to share today the plans to step up our store opening programme, to increase our online capacity, the introduction of Clubcard Plus in the UK and the acquisition of Best Food Logistics as the next step in our Booker growth strategy.

'With the turnaround complete and as we begin to implement the next steps of our sustainable growth strategy, now is the right time to plan a smooth and orderly succession. As such, I will step down as Group CEO next summer and pass the baton to Ken Murphy.”

John Allan, Chairman, said, “It is with regret that I have accepted the resignation of Dave Lewis as Group CEO of Tesco, who has decided that he wants to leave the business in the summer of 2020.

'Dave has done an outstanding job in rebuilding Tesco since 2014 and he continues to have unwavering support from the Board. Some time ago, however, he indicated to me that he was considering the best time to hand over to a successor. His openness allowed me to begin a thorough and orderly process to identify a potential candidate to replace him. As a result, today, we have appointed Ken Murphy to succeed Dave as Group CEO of Tesco next summer.

'Ken is unquestionably, a seasoned, growth-orientated business leader. He has deep commercial, marketing and brand experience within retail and wholesale businesses, first with Alliance Unichem, and then with Boots.

'He was Joint Chief Operating Officer at Boots UK & Ireland before rising to Executive Vice President, Chief Commercial Officer and President Global Brands at Walgreens Boots Alliance. Ken has values which align with our own, strong strategic and operating acumen, and is proven at the very top of a large and respected multinational retail group.

'I firmly believe we have the right person for the job. Ken has contractual commitments to his previous employer, and therefore we will announce his precise start date in due course.

'Today’s results confirm that the Tesco turnaround has been delivered. Under Dave’s leadership Tesco has transformed customer satisfaction and rebuilt the business. We can now move forward with renewed confidence. We have an exceptional leadership team, a very clear strategy, a re-invigorated brand and financial strength.”