Britain’s biggest retailer Tesco has surprised the market with the news that its CEO Dave Lewis is to stand down in the summer of 2020.
Analyst Clive Black at Shore Capital said Mr Lewis’ departure will need to be absorbed by the market and the disappointment of Tesco’s chairman is palpable, but “put quite simply he is the bloke that saved Tesco”, which should go down as an enormous achievement in British retail history.
Read more: Tesco boss to step down
Mr Black added that Mr Lewis will undoubtedly be a loss to the group and so his replacement Ken Murphy has “big shoes to fill”.
Roy Kaitcer, investment manager at Leeds-based stockbroker Redmayne Bentley, said a positive set of results for supermarket giant Tesco had been overshadowed with the news of Mr Lewis’ departure.
Mr Lewis took over as chief executive in the year Tesco was hit by an accounting scandal, where it was revealed the store had overstated its profits by £250m. In April 2015, the store announced a £6.4bn loss, the worst in its history.
Mr Kaitcer said Mr Lewis was obviously instrumental in the turnaround of Tesco and investors will be hoping that these measures will be continued by Mr Lewis’ successor.
Richard Hunter, head of markets at interactive investor, said Tesco is almost unrecognisable from the state it was in five years ago.
He said the legacy Mr Lewis leaves is one of a company whose turnaround has been impressive to watch.
Thomas Brereton, retail analyst at GlobalData, said with Tesco’s impressive like-for-like sales growth overshadowing the UK grocery market for the majority of the last 18 months, Mr Lewis is certainly positioned to leave on a high.
He added that although the latest interim results mark a small dip in form (compared, for example, to a rapidly recovering Sainsbury’s), Mr Lewis’s impressive legacy is set to be one of consistent profitable improvement over a challenging five-year period for the market leader.
Mr Brereton said that Mr Murphy will need to hit the ground running when he arrives in mid-2020.
He believes that although the Brexit haze should have cleared by then, Tesco – along with the rest of the sector – will still likely be experiencing a hangover caused by the disruption.
The challenge for Mr Murphy will then be transitioning Tesco to a market-leading innovator without damaging the steadfast, profit generating machine it has become under Mr Lewis.
Describing his departure as an unexpected resignation in the bagging area, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said investors weren’t expecting a changing of the guard.
She said Mr Lewis’ resignation comes as a surprise in many ways, but it looks set to be a well managed transition which should limit potential disruption.
Mr Lewis finished what he set out to do - margins have hit targets and the brand has been rejuvenated.
Ms Lund-Yates said that means the CEO is bidding farewell at what feels like a natural time, and sturdy foundations have been laid ready for someone else to get to work on the next round of growth.
She added that the fact a successor is already waiting in the wings has also limited any uncertainty, meaning both investors and the business won’t be left in limbo.
Tesco is now in a good position and has worked hard to fend off rising competition in the sector.
However, Mr Murphy will have a tough job matching Mr Lewis.