December 2, 2014 / 12:42 AM / 5 years ago

Tesco's shares rise after CEO's move to take the helm in UK

LONDON(Reuters) - A decision by Tesco’s (TSCO.L) new chief executive to personally take over the day-to-day running of the grocer’s core British business as it heads into the key Christmas trading period was broadly welcomed as a pragmatic move by analysts on Tuesday.

Shares in Tesco, which have fallen 44 percent so far this year after an accounting scandal compounded a succession of profit warnings, closed up 2 percent on Tuesday, following the management reshuffle announced by Tesco after the stock market closed on Monday. [nTESCO]

Dave Lewis, who does not have any direct experience as a retailer, made his move with the UK business facing extremely tough trading conditions.

Industry data published last month showed Tesco’s UK sales, which account for two thirds of group revenues, falling at a greater rate than any of its main rivals — Asda (WMT.N), Sainsbury’s (SBRY.L) and Morrisons (MRW.L) — as it continues to lose market share to German discounters Aldi and Lidl.

Lewis’s decision to take up the reins of the UK business also follows Tesco’s poor handling of its popular ‘Black Friday’ sales promotion last week. Police had to be called to stores, prompting scathing criticism from a senior police officer over the grocer’s insufficient security.

Tesco said Lewis’s leadership of the UK operation would be temporary. This, analysts said, implied the future external appointment of a new UK managing director or CEO.

Shore Capital analyst Clive Black said Lewis had shown “a sense of responsibility, priority and perspective,” given that stabilising the UK was Tesco’s top objective.

Bernstein Research analyst Bruno Monteyne, a former senior Tesco supply chain executive, said Lewis’s move was sensible, since “most of Tesco’s value depends on management turning around the UK.” He added that Lewis’s skills in branding and consumer insight were most needed in the UK.

However, independent retail analyst Nick Bubb said Lewis didn’t have much choice but to take control of the UK, “given how denuded the talent pool is at Tesco.”

After a 27-year career at consumer products giant Unilever (ULVR.L), Lewis succeeded Phil Clarke as Tesco’s CEO on Sept. 1, only to report three weeks later that the firm had overstated expected first-half profits by 250 million pounds ($393 million), a figure that was later raised to 263 million pounds.

The scandal led to the suspension of eight senior members of staff, including UK managing director Chris Bush, and sparked a series of investigations, including by Britain’s Serious Fraud Officer and possible investor lawsuits both in Britain and the United States. [ID:nL6N0TF2QP]

Tesco said on Monday that one of the eight suspended senior managers, Matt Simister, will return as group food sourcing director.

It said four of the remaining seven suspended senior managers had now left the company for good but declined to name them. Other media reports said that Bush, Kevin Grace, the group commercial director, Carl Rogberg, the UK finance director, and John Scouler, the UK food commercial director, had departed.

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

In other changes taking effect on Jan. 1, Benny Higgins will take on responsibility for group strategy in addition to his role leading Tesco Bank.

Robin Terrell, Tesco’s multi-channel director who stepped in to temporarily lead the UK business in September, will become the firm’s “head of customer”, effectively its marketing head.

(1 US dollar = 0.6369 British pounds)

Reporting by James Davey; Editing by Mark Potter and Greg Mahlich

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