Tesco results show profits rise, CEO to step down, Ken Murphy takes over in 2020
That news rather overshadowed the company's interim results on Wednesday as Lewis has been crucial in returning the business to health after a bruising period that saw it struggling to keep up with nimbler rivals and also having to admit that its profits had been overstated.
Chairman John Allan praised the outstanding job that the CEO has done but said Lewis had indicated some time ago that he was considering the best time to hand over to a successor and this allowed Allan “to begin a thorough and orderly process to identify a potential candidate to replace him.”
Step forward Ken Murphy, who Allan called “a seasoned, growth-orientated business leader [with] deep commercial, marketing and brand experience within retail and wholesale.” He was Joint COO at Boots UK & Ireland before rising to Executive VP, Chief Commercial Officer and President Global Brands at Walgreens Boots Alliance.
When will he join? Well, Murphy currently has contractual commitments to his previous employer, and a start date will be announced “in due course”.
So now to the results. Tesco still faces a hugely competitive market in the UK supermarkets sector and in the value clothing sector in which its F&F brand operates.
The company said that in the six months to August 24, group sales rose 0.1% to £28.3 billion, but fell 0.4% on a currency-neutral and like-for-like basis. Sales in the UK were positive on all those measures but in central Europe they fell, dropping 7% at actual exchange rates. However, they rose 8.4% at actual exchange rates in Asia.
It’s the UK operation that's crucial as it accounted for £22.4 billion of the company’s turnover in the period and improvements in its domestic market are what helped to boost operating profit by 12.6% to £1.134 billion. Pre-tax profit rose 6.7% to £494 million.
It's frustrating that the company didn't make any direct reference to how its fashion operations are performing. Given that Tesco is the UK's largest supermarket chain and that its fashion product is available in all of its superstores, as well as online, it’s actually a significant player in the British fashion market. And its plan to open four new superstores in the UK and Ireland in the period ahead should add to that, as should its ongoing investment in its web operations. The company is actually planning to double its overall online capacity in the UK, it said on Wednesday.
However, it did say that the closure of Tesco Direct, its separate UK online general merchandise business, in July 2018 negatively impacted overall UK & Ireland performance by 0.4%.
Tesco now sells both groceries and F&F via its main website but we didn’t hear any news about how that’s going and it looks like we'll have to wait for future results announcements to hear about any more positive impact from fashion and general merchandise.
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