Tesco Plc (TSCO) Chief Executive Officer Dave Lewis is to assume direct responsibility for the U.K. unit, the company’s biggest business, as the British retailer seeks to recover from the fallout of overstated earnings estimates.
Lewis will take over running the unit on an interim basis from Robin Terrell, who had been in charge of the business since the company in September divulged the accounting irregularities. The change takes effect next month, the Cheshunt, England-based retailer said on its website yesterday.
The CEO, who joined Tesco from Unilever on Sept. 1, is overhauling management to stabilize the business amid slumping sales and declining market share. Among the changes, Benny Higgins will oversee group strategy in addition to running Tesco’s banking division. Chairman Richard Broadbent has said he will step down following the accounting problems, which have led to a probe of Tesco by the U.K.’s Serious Fraud Office.
Taking direct control of the U.K. business “is the right solution” in the short term, said Bruno Monteyne, an analyst at Sanford C. Bernstein in London. With the grocer generating about two-thirds of revenue at home, “Tesco’s success is entirely associated with the U.K. at this point.”
Lewis is trying to bolster Tesco’s balance sheet, respond to nimbler competitors and rebuild faith in the brand after a miserable year for the grocer. The turnaround may include price cuts and disposals, the CEO has said.
Tesco shares were little changed at 183.95 pence as of 8:04 a.m. in London. They’ve declined 45 percent this year.
Two management positions have been eliminated — that of chief creative officer and group business planning and strategy director, Tesco said yesterday. Terrell will assume Tesco’s head of customer position among other changes.
“The additional clarity and the names, it all makes entire logical sense,” Monteyne said. Lewis may want to appoint a separate U.K. CEO in the medium term “but that entirely depends on how big Tesco will be post the disposals.”
Andrew Yaxley, who was appointed managing director of Tesco’s London operations last year, could be a good candidate for the U.K. CEO role in one or two years once he has more operational experience, Monteyne said.