All the talk has been about Philip Clarke stepping down from Tesco (LSE: TSCO), but let’s take a look back at who’s come in to the supermarket, and if they can help turnaround the company’s fortunes.
New finance director Alan Stewart joins with a reputation as an effective cost cutter from his tenure at Marks & Spencer. This may be useful, but seems to contradict most of the messages from Tesco over the last two years. My reading has been that management felt that a large part of the problem was a lack of investment in products and stores. Particularly when others (Sainsbury’s) were investing for the future and new competitors (Aldi, Lidl) were entering the market.
I also wonder why they are hiring from M&S. There does not seem to be anything particularly exciting in the last results from M&S that would suggest that Tesco would pick it as their hiring ground or need to throw cash at new hires to get them to move.
Tesco is part way through a change in moving from low-value general merchandise to higher-margin clothes and housewares, and presumably Mr Stewart will help with this (though he is on gardening leave until December). He also has turnaround experience having worked with Kate Swann at WH Smith. But I do wonder whether this is a missed opportunity.
Tesco has three, largely unvalued, strings to its bow that I would like to see it clearly delivering on:
- Through the Clubcard, it has one of the biggest sets of data on UK consumers. Used well, I see this as an advantage for retail operations (presumably enacted) but also as a way to leverage the data into other products, probably with other partners.
- Tesco bank. With the changes we are seeing in digital banking, including such areas as paying in cheques by phone, I see Tesco as well placed to be a genuine challenger bank, if it wants to become one.
- IT and distribution services. Amazon has the Kindle, last Christmas Tesco launched its tablet, the Hudl. By all accounts, a very well priced (you could use Clubcard points) and well-specified product. It also featured a ‘buy from Tesco app’. Tesco seems to be in a position to choose to be a significant player in the UK consumer IT market (1,000 Tech support advisors in 200 stores), and a potentially genuine competitor to Amazon in the UK with a distribution network in existence. But it has to make a conscious decision to do this.
I do not see Mr Stewart joining as being a negative. But equally I do not see it as a positive declaration that Tesco is going places or introducing new initiatives. Hiring the Amazon UK FD would have made the market sit up, as I think might a number of other possible choices. The shares seem fully priced for now…