10 things Tesco's new boss Dave Lewis could do

Graham Ruddick, and Ben Martin
21 Jul 2014
The Telegraph

Britain’s biggest retailer has replaced Philip Clarke with Dave Lewis, and the City is not short of ideas for what Tesco’s new chief executive must change
1. Rebrand Tesco stores as Tesco Value, Tesco Finest stores, and midmarket
Bruno Monteyne, analyst at Bernstein: “Tesco became successful by ‘being everything to everybody’ and being the fastest at putting down space. That was fine as long as Tesco had limited local competition. Now Tesco faces distinct and targeted local competitors in most of its neighbourhoods.
“If you want cheap food, there is a better alternative next door – Asda, Aldi, Lidl – if you want great quality the same applies – Sainsbury’s, M&S, Waitrose.
“Tesco responded by trying to be ‘bit better at everything’ but that doesn’t change the local trade-off consumers face. “
2. Cut prices
Nick Bubb, independent retail, said: “Dave Lewis knows nothing about retailing, but maybe that doesn’t matter, because as a leading supplier he certainly knows how to win price wars and perhaps that is the big issue now facing Tesco in the UK.”
3. Consider scrapping Clubcard
Clive Black, analyst at Shore Capital: “A material change in UK trading strategy cannot be dismissed, which is likely to have considerable implications for the rest of the British sector. Will Mr. Lewis keep Clubcard, Fuel Save, Price Promise and all of the other initiatives through which Tesco seeks to extol its value credentials to such poor recent effect?”

4. Take the Tesco brand back to basics

Professor Chris Edger, retail expert: “Tesco need to slash profit margins and get the business back to what it stood for at the start, when it was under the mighty Jack Cohen. The internet and value retailers will continue to rip into Tesco unless consumers perceive it is returning to its original purpose – providing ‘surprice’ for customers.”
5. Negotiate better deals with suppliers
Keith Bowman at Hargreaves Lansdown: “The appointment of an outsider has at least provided some hope, with Tesco clearly in a better position to negotiate with major supplier Unilever going forward.”
6. Develop Tesco’s online operations
Andre Spicer, professor of organisational behaviour at Cass Business School, says: “The biggest challenges in his inbox will be positioning Tesco in a retailing world where the middle market is disappearing, making the supply chain more sustainable, and ensuring the business model is tuned for an increasingly digital future.”
7. Revamp the senior management team
Clive Black, analyst at Shore Capital: “We expect to see adjustments to Tesco’s executive team in time and maybe considerable reconfiguration of the group and executive boards, noting as we do considerable market criticism of senior management in recent times.”
8. Reposition out-of-town supermarkets
Natalie Berg, global research director at Planet Retail, said: “Although we feel Clarke has made significant progress on refreshing existing stores, the fundamental issue remains – shoppers are no longer making that big weekly trip to an out-of-town superstore. Unfortunately for Tesco, over half of its stores fall in the 50,000+ sq ft bracket.
“A change in leadership may bring some much-needed fresh thinking to Tesco, but the structural shifts in the grocery sector cannot be reversed. Lewis will need to reposition Tesco to adapt to this new normal.”
9. Sell underperforming international businesses, like Carrefour did
James Anstead, analyst at Barclays: “The most recent change in CEO at Carrefour precipitated a very positive share price reaction over an extended period – and some may wonder if Tesco might now be at a similar point. However, this is not a perfect parallel since Carrefour was already showing some small signs of recovery in France at the time of the change – and the company went on to divest a number of assets for surprisingly good prices. We would hesitate to expect any material divestments from Tesco since its international business is arguably rather better knitted together than was that of Carrefour – and the assets it might be less attached to are not those especially coveted by other retailers.”
10. Reduce the margin below 5pc and cut costs
Arnaud Joly, analyst at Societe Generale: “Tesco needs to be more aggressive on prices, costs and differentiation. It needs to find its merchant spirit again and should focus on sector key fundamentals.”

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