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New Tesco chief pledges to address loss of market share

Dave Lewis rallied staff on his first day as chief executive of Tesco with a promise to restore the UK’s largest grocer as “the customers’ champion”, while highlighting its loss of market share in the UK as its most urgent problem.

The ex-Unilever executive, who was catapulted into the job on Monday, a month earlier than planned, said he would spend his first few days in meetings – including with investors.

This followed the decision by US fund manager Harris Associates – one of the group’s biggest investors – to slash its holding in the underperforming retailer, citing an “unclear management direction and incoherent strategy”.

Shares in Tesco fell another 2 per cent on Monday following Friday’s profits warning and dividend cut, as some investors bailed out. But others dived in.

Bruno Monteyne, analyst at Bernstein Research, said: “There was a lot of selling at the end of last week. Tesco has a large base of value investors. They are broadly speaking either taking the view that this is the bottom and doubling up, or getting out because the situation is not playing out as they expected. From what we’ve been seeing, there was lots of action both ways at the end of last week and some people are increasing their stakes.”

One top 20 investor in Tesco said: “We looked at selling shares four or five months ago and sold a little bit of our stake, but we do not think now is the time to sell again. We think that Tesco is in a position to recover from here. The announcement on Friday has cleared the decks for Lewis.”

Mr Lewis paid tribute to his predecessor Philip Clarke, who was ousted in July, saying the retail market in all the countries in which Tesco operates “has become extremely tough”. He gave no clues as to his strategy, but said that Tesco’s loss of market share in the UK needed to be addressed “with urgency”.

Despite his lengthy to-do list, Mr Lewis said he would not be rushed on strategy. “I won’t take any hasty decisions . . . We have some urgent issues to deal with but we must address these in a way which is consistent with building a long-term sustainable future,” he said in the staff memo.

Analysts at Deutsche Bank – which is Tesco’s joint broker – downgraded their recommendation on the group the day before the profits warning, from Buy to Hold, citing “low visibility” given the management changes. These include a new finance director, Alan Stewart, who is to start in December.

Moody’s, the rating agency, left its “stable” outlook unchanged, but said on Monday it would reassess its rating and outlook “if there is a further material deterioration in operating performance”. It added that Mr Lewis’ early start was “a positive sign that the company is eager to reassess its strategy”.

Tesco has been slow to respond in the supermarket price war and has been losing market share to Aldi and Lidl, the German hard discounters.

One top 20 investor said turning Tesco round needed time: “We are a long-term shareholder and will stick with the group. Clarke was too slow to respond to the threat of the discounters and the online challenge, which is why he has gone. We would like to see some clearer signs on strategy over disposals and how the group can take on the discounters.”