trending Market Intelligence /marketintelligence/en/news-insights/trending/uiJEPUwfiunMVsmCyeu-2A2 content esgSubNav
In This List

Tesco unveils new CEO, reports fatter margins boost H1'20 profit

Blog

Using ESG Analysis to Support a Sustainable Future

Video

S&P Capital IQ Pro | Powered by Expert Insights

Blog

Q&A: Streamlining Analytics for TCFD Reporting

Blog

Evergrande and the wider impact: a sentiment analytics based perspective


Tesco unveils new CEO, reports fatter margins boost H1'20 profit

Tesco PLC on Oct. 2 reported better-than-expected earnings for its fiscal first half, boosted by fatter profit margins, and it announced the appointment of a new CEO.

Ken Murphy, chief commercial officer at Walgreens Boots Alliance Inc., is due to succeed Dave Lewis in the summer of 2020.

The announcement of Lewis's departure was unexpected. Lewis, who has been CEO of Tesco since 2014, said his decision to leave was "a personal one" and comes at the completion of the U.K. supermarket retailer's turnaround. "I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton," Lewis said in a statement.

Chairman John Allan said he had accepted Lewis's resignation "with regret" but Lewis' "openness allowed me to begin a thorough and orderly process to identify a potential candidate to replace him."

Allan described Murphy as a seasoned, growth-orientated business leader. Murphy "has values which align with our own, strong strategic and operating acumen, and is proven at the very top of a large and respected multinational retail group. I firmly believe we have the right person for the job," Allan said.

Murphy has commercial, marketing and brand experience at Alliance Unichem and Boots, now part of Walgreens Boots. Murphy is chief commercial officer and president of global brands. Murphy's start date at Tesco is yet to be confirmed, but he will join with a base salary of £1.35 million.

Tesco reported net income before exceptional items for the 26 weeks ended Aug. 24 rose to £720.0 million from a restated £419.0 million in the 26 weeks to Aug. 25, 2018. Revenue rose to £31.9 billion, up from £31.7 billion.

Operating profit rose to £1.41 billion from £1.12 billion. The figure beat a mean consensus estimate for operating profit of £1.34 billion compiled by S&P Global Market Intelligence with three analysts reporting.

Operating margin climbed to 3.73% from 2.94%, achieving the company's target for operating margin of 3.5% to 4.0% six months ahead of schedule. The bulk of the increase — 90 basis points — came from Tesco's operations in the U.K. and Ireland, the largest part of its business, and was fueled by improved product mix and cost savings.

In the U.K., Tesco said it had outperformed in volume terms. It added that sales in its online grocery business grew 7.4% year over year compared with growth of 2.5% a year ago. Its wholesale business, Booker, saw sales growth, excluding tobacco, of 3.6% year over year despite "exceptionally strong" comparisons.

Tesco announced it will buy the assets and operations of Best Food Logistics, a distributor of food to customers including Pret a Manger, KFC and Burger King, for a "nominal consideration," bringing an additional £1.1 billion in food service sales.

The retailer plans to open 750 express stores in Thailand and 150 express stores in the U.K. over the next three years. It will also proceed with four new superstores in the U.K. and Ireland.

The retailer also plans to open three outlets of its discount chain Jack's by February 2020.

In early trading in London, Tesco's shares were up 4.97 pence, or 2.1%, at 244.47 pence.