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Walgreens Boots Alliance, Inc. (WBA)

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Tesco CEO Lewis steps down as interim profits rise

02 Oct 19

LONDON (ShareCast) - (Sharecast News) - Tesco chief executive Dave Lewis said unexpectedly that he would step down in 2020 to be replaced by Walgreens Boots Alliance executive Ken Murphy as the company reported higher interim profits.

Lewis said his decision to leave after five years in the role was personal. "I believe the tenure of a chief executive should be a finite one and that now is the right time to pass the the baton. The turnaround is complete, we have delivered all the metrics we set ourselves," he said.

Operating profit increased 12.6% to 1.13bn on flat revenues of 31.9bn. "As we move beyond our turnaround goals, we are expecting a more even balance of profitability between the first and second half, the company said on Wednesday.

Group operating profit before exceptional items rose 25.4% to 1,406m. The company also hit hits margin target of 3.5% - 4% - six months ahead of schedule.

Murphy was joint chief operating officer at Boots UK & Ireland before promotion to executive vice president, chief commercial officer and president of global brands at Walgreens.

Lewis took over at Tesco in 2014 as the company revealed an accounting scandal involving overstatement of profits. It then reported a loss of 6.4bn, the biggest-ever suffered by a UK retailer, as Lewis started aggressively cutting costs, including firing 4,500 staff in 153 Tesco Metro.

He also engineered the 3.7bn takeover of food wholesaler Booker. chief analyst Neil Wilson said the the rise in operating profits was largely due to cost cutting.

"UK like for like sales took a hit in the second quarter though. We thought LFLs would be challenged in Q2 but it looks worse than thought with UK LFL -0.3% dragging down Group LFLs to -0.4%. The structural and cyclical headwinds are combining for UK retail now," he said.

Wilson said Lewis departure would be a "big blow for Tesco" and likened his departure to that of Manchester United football club Sir Alex Ferguson, who led the team to consistent success only for the team's fortunes to wane after he left.

"Retail bosses are like football managers, a handful of names always moving around the top jobs, notching maybe a season or two of success before inevitably failure catches up with them. Many fail from the get go. Few ever really make the difference for long," he said.

"Tesco just lost Fergie. And rather like Man Utd when he left, the outfit he left behind could be in better shape. Those LFLs don't look too pretty - Lewis has chosen his moment well. Investors may follow him.

"Ken Murphy has solid pedigree, coming from Walgreens Boots Alliance, a retailer that understands cost cutting. He'll need to employ these skills at Tesco where he'll have to contend with tougher organic comparisons post the Lewis era. Moreover the battle with the discounters is only just starting."

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Market Data

Currency US Dollars
52 Week High $74.43
52 Week Low $49.29
Shares Issued 895.39m
Market Cap $47,832m


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