Comment

New Tesco boss has little cause to rock the boat with such smooth sailing ahead of him 

The recently departed Dave Lewis steadied the ship, leaving successor Ken Murphy with little to do other than keep course

Tesco
The new Tesco boss wants to keep Britain's biggest supermarket "focused"
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Here’s a fun game to play: which Tesco boss would you rather be? Is it the recently departed Dave Lewis, who inherited a retailer rocked by a massive accounting scandal and faced immediate questions about the very future of one of the UK’s largest companies?

Or his replacement Ken Murphy, who in his first week in charge has unveiled a 30pc jump in pre-tax profits, a 21pc increase in the interim dividend, plus a further £5bn kitty to dish out to investors later in the year.

On the face of it, the new broom has a much easier job. Even the pandemic hasn’t proven to be the great doomsday event for supermarkets that it has been for other industries.

Covid, and lockdown, have been great for grocery shopping. True it has triggered a whole load of one-off costs – £533m for Tesco during the half-year – but even those have been largely offset by the Government’s misguided decision to provide business rates relief to the one sector that hasn’t been upended by the crisis.

Lewis might have walked on water in the clubby world of retail-land, but an almighty bonus row, and an ill-timed dividend payment, ensured that his final few months were beset by controversy. Still, there’s no doubt he left behind a business unrecognisable from the one he took over, even if the same can’t be said of a share price that largely went sideways.

So, where does that leave Murphy? With the virus going nowhere fast, he will need to ensure Tesco is fully Covid proof. Yet the hard yards have already been put in on that front. There will be the abiding threat of Aldi and Lidl to contend with, though even the discounters may have finally peaked.

The biggest challenge will be online. Turbocharging delivery operations is the easier bit. Capacity has already more than doubled from 600,000 to 1.5m slots a week during lockdown and the opening of a specialist online hub in one of its West Bromwich stores will be followed by a further 25 so-called “fulfilment centres” over the next three years.

The more difficult part is making money from home delivery but even there Murphy admits that profitability is improving because order sizes are getting bigger and almost a third of online slots are now click-and-collect, which reduces delivery costs.

Lewis had plenty to keep him busy. By comparison, Murphy inherits a business set to sail serenely through retail-world with few, if any, levers to pull to liven up proceedings. Consolidation, international expansion and diversification have all been tried and failed. He’s not even interested in selling the poorly performing bank.

But no top boss with even a scintilla of ambition would be content to sit there twiddling their thumbs until the inevitable opportunity comes up to take on a handful of non-executive roles, would they, so what’s the grand plan?

“This is less about me making my mark and much more about Tesco delivering for customers,” he said earlier today. Move over “Drastic Dave”, here comes “Mundane Murphy”.

LSE takes stock

The decision of Chancellor Rishi Sunak to order a review of the rules for companies wanting to list shares on the London Stock Exchange has prompted much excitement.

Reform is long overdue. High profile car crashes like commodities outfit EN+, Indonesian coal miner Bumi and Kazakh miner ENRC have damaged London’s standing as a financial centre of scrupulous standing.

The argument has always been that there are bigger and deeper capital markets than the City, therefore the way for London to compete with the likes of New York is to have the most rigorous rules on governance.

As a side note, it was always a three-way shoot-out with Hong Kong completing the holy trinity but recent events have conspired to make the former colony less attractive these days. It turns out months of rioting, as well being stuck in the middle of a trade war between the world’s only two superpowers, isn’t great for wooing foreign investors.

Still, it is all very nice and reassuring to think that being the cleanest corner of the capital markets is a compelling calling card but there are two problems with the theory.

The first, of course, is Brexit. As the Government’s utter indifference towards the fate of Arm demonstrates, the UK is desperate to live up to its self-proclaimed status as the most open country in the world, so surely we will take anyone right now regardless of their questionable activities.

Secondly, if you set yourself up to be whiter than white then of course you will attract companies desperate to prove that they are clean, or put another way, with something to hide.

Those natural resources companies with ties to hostile regimes and the oil-pumpers from Middle Eastern states with terrible human rights records doth protest too much.