£2.9m bonus for Tesco's chief as supermarket returns to the black

Tesco chief executive Dave Lewis has been awarded an annual bonus of £2.9 million, taking his total pay for the year to £4.6 million.

Dave Lewis of Tesco

The figures, revealed in the supermarket’s annual report, also show that the supermarket’s chief financial officer, Alan Stewart, pocketed £2.5 million, which includes a bonus of £1.6 million.

Tesco’s remuneration report said the payouts were awarded after “financial targets for sales and operating profit ... were met almost fully”.

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Tesco swung back into the black in February, notching up a pre-tax profit of £162 million compared with a £6.4 billion loss a year earlier.

Mr Lewis said the grocer had made “significant progress” since last year, adding: “We have taken decisive, immediate action on the challenges we faced. In a very deliberate way we have made the changes needed to re-energise the operation.

“We have stabilised the business and we are on track with where we expected to be.”

Mr Lewis has been praised for turning the ailing giant around after the disastrous reign of his predecessor, Philip Clarke, which saw profits slide, market share eroded and an accounting scandal dog the firm.

Mr Lewis joined Tesco in 2014 from Unilever and has moved to make the company more competitive in the midst of a bitter supermarket price war and the rise of German rivals Aldi and Lidl.

The company also confirmed that its 300,000 employees will be awarded a one-off “turnaround bonus”, amounting to 5% of salary.

Analysts have compared Mr Lewis’s performance to “turning around an oil tanker in a very tight spot ”.

Despite being hemmed in on all sides by ruthless competition and food price deflation, analysts said Lewis has shown both skill and vision.

Last month, John Ibbotson, director of Huddersfield-based retail consultancy Retail Vision, said: “Yes, the turnaround is painfully slow, but for the Tesco behemoth to have begun its pivot without hitting the rocks is a huge achievement.

“For a brand that last year posted the largest ever loss on the UK high street, the return to sales growth for the first time in more than three years feels like a transformation.”

Mr Ibbotson believes that Tesco’s vast size is an advantage because it allows the retail giant to keep prices down for longer than its rivals.

In April, analyst Clive Black at Shore Capital said Tesco had reported material steps forward on a road to recovery and, hopefully, a better place for its investors.

Taking the oil tanker metaphor one step further, he said: “We believe that Dave Lewis, the group’s likeable CEO, deserves considerable credit for steering this near retail shipwreck to calmer waters, where the group’s engineers’, can and are now making progress.”

Announcing the results last month, Mr Lewis said management actions had stabilised the business, which he admitted was in “crisis” when he replaced Mr Clarke in September 2014.

Its woes were compounded as trading across the sector was hit by falling food prices, made worse by a price war sparked by the increasing strength of discounters Aldi and Lidl.

While the results showed Tesco’s trading has turned the corner, Mr Lewis was reluctant to call the end of falling sales, stressing the group continued to trade in “uncertain times”.

Under Mr Lewis, Tesco has shut 60 unprofitable stores since the start of its financial year and shelved plans to open a further 49 shops.

He has also cut prices across hundreds of lines, while making a raft of changes such as shutting Tesco’s final salary pension scheme, disposing of its loss-making Blinkbox operation selling online videos, and moving its main headquarters from Cheshunt to Welwyn Garden City in a measure expected to save £250m.

Last month, he kicked off the next expected wave of asset sales by offloading an 8.6 per cent stake in Singaporean online business Lazada to China’s ecommerce giant Alibaba for £91m.