December 22, 2014 / 12:48 PM / 5 years ago

Tesco masterplan? New boss keeps investors and staff guessing

LONDON (Reuters) - When Phil Clarke was sacked as Tesco’s CEO, senior executives hoped his 0700 strategy meetings would go with him. They did - new boss Dave Lewis starts his at 0630.

Tesco chief executive Dave Lewis leaves an office, after the announcement of the company's interim results, in the City of London October 23, 2014. REUTERS/Suzanne Plunkett

Parachuted in from Unilever in September, Lewis soon faced the task of making the shock announcement that a 250 million pound hole had been found in Tesco’s profits, in an accounting scandal that led to the departure of several senior executives.

Now the CEO - despite having no direct retail experience - is keeping management on a tight rein and personally taking charge of key areas of the business, sources say. And as he conducts a vast review of Tesco’s operations to come up with a strategy to revive its fortunes, he is giving little away - even to insiders.

The 49-year-old has promised to give some details on Jan. 8 about the measures he plans to take, but all the contents of his blueprint have not yet even been seen by senior management at the firm, according to a source close to the situation.

In fact the only member of the leadership team to be consulted on the new strategy is another newcomer to the firm, Chief Financial Officer Alan Stewart, the source said.

Key internal talks around financials, customer issues and products have been kept to separate teams, with all big decisions taken by Lewis and Stewart, the former finance chief at Marks & Spencer.

“He tends to operate keeping everything compartmentalised, so he keeps his own counsel on the masterplan,” said the source, who did not wish to be named. “He doesn’t have a core five or six people that he discusses everything with.”

Tesco declined to comment for this story.

Lewis arrived in the worst crisis in the grocer’s 95-year history.

Nicknamed “Drastic Dave” after fixing units of Unilever with cost cuts and innovative marketing, he will have to show similar resolve to improve Tesco’s competitiveness and strengthen the balance sheet of the firm which issued its fourth profit warning in five months two weeks ago.

After two decades of growth, Tesco has lost its way - distracted by an expensive overseas expansion strategy when it needed to respond to the rise of discount grocers; and wrong-footed by a boom in convenience stores and online shopping.

“IN THE GANG”

Lewis has said there is no quick fix, and favours steady customer-focused improvements. Price cuts, major asset disposals and a cash call to fix creaking finances are all options.

His decision to take over temporarily the day-to-day leadership of the UK operation - whose boss left after the accounting scandal - is illustrative of his hands-on approach, punctuated by emails fired off to staff around the clock.

Earlier this month, according to an industry source, he personally took charge of meetings with Tesco’s top 25 suppliers, instead of newly promoted commercial director Jason Tarry, to the surprise of some attendees.

Incorrectly booking payments from suppliers was at the centre of the accounting debacle, which is being investigated by Britain’s accounting watchdog and Serious Fraud Office.

With Tesco’s share price having halved in a year, the spotlight is on what it must do to revitalise a business still the UK market leader but now steadily losing share.

However, company insiders say challenges also lie much closer to Lewis at his head office in Cheshunt, north of London.

During Clarke’s disastrous three-year-and-a-half year tenure, Tesco’s management talent pool was irresponsibly reduced, according to former company directors.

Lewis now heads a team depleted further still by suspensions and exits, and retaining talent could be a difficult task.

“Him keeping ... everyone sort of slightly in the dark feeds uncertainty. Nobody is quite sure whether they are in the gang or not,” the source close to the situation said.

Investors will hope that in his Jan. 8 update Lewis will ditch the corporate jargon which - despite an army of PR advisors - has proved a hindrance both internally and externally.

The Financial Times this month ran a “Dave Lewis jargon-buster” to help readers decipher phrases such as “rebasing relationships with suppliers”.

Analysts, drawing parallels with Tesco’s current plight, say when Lewis returned to Unilever UK in 2005 it was suffering from declining market share, had an uncompetitive cost base and a weak image with customers. Nine years on, it’s revitalised.

One unnamed former UK Tesco director, who knows Lewis, said he was a “formidable” fighter.

“I think he’s getting a good grip of things and I think he’ll do a decent job,” he told Reuters. “The big issue is how he sets his stall out for the next two to three years, not the current focus on profits.”

Additional reporting by James Davey and Kate Holton; Editing by Pravin Char

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