Tag Archives: Dave Lewis



The start of 2015 saw a very old saying amongst stockbrokers come true: ‘Sell your shares in any company when it buys a company jet or builds a new headquarters’ they say. Companies lose touch with reality as they get bigger and one person who seems to agree is ‘Drastic Dave’ Lewis, the new Chief Exec. of Tesco. He announced the closure of both their Cheshunt HQ and Kansas Transportation Ltd, the Company subsidiary which discreetly operates a fleet of 5 executive jets.

From now on it’s RyanAir only for Tesco directors as they struggle against falling sales and a £260 million accounting scandal

This must come as a disappointment to former CEO Phillip Clarke (currently under investigation by the Serious Fraud Office). It limits the possibility of doing a flit in the £31 million Gulfstream jet delivered last month as part of the £29m cost of flying executives around the world 2005-2012. From now on it’s RyanAir only for Tesco directors as they struggle against falling sales and a £260 million accounting scandal. And now we know who owns all those private jets parked at Luton airport.

The good people of Cheshunt, home to Tesco’s ugly concrete HQ since 1973 were also less than happy about job losses and a move for remaining staff to Welwyn Garden City. ‘I can’t believe it’ Ward Councillor Mike Iszatt told the ‘Hertfordshire Mercury’. ‘I don’t know why they want to move out of the Borough – it’s so convenient for their employees next to the station and we’ve got crossrail coming in the near future. I hope they will reassess their decision’.

The international credit rating agency Moody’s downgraded Tesco’s credit rating to ‘junk’

Apart from that, Drastic Dave suspended yet a ninth executive – Chris Robinson, finance director at food sourcing – and confirmed the closure of the defined benefit pension scheme for staff, 43 convenience stores and cancellation of 49 new store developments. Stockbrokers seemed mildly pleased and shares rose to £2.20, still less than half their pre-scandal level. Nevertheless the international credit rating agency Moody’s downgraded Tesco’s credit rating to ‘junk’, saying “structural changes in the UK grocery retail market will continue to challenge the Company’s operating performance”. Whether that enables suppliers to demand better terms from the retailer is unclear.

The announcement of a new ‘Retail Ombudsman’ has been greeted with mixed feelings

The ‘Kipper season’ is now upon us. It’s always a good time for everyone to have a moan so the announcement of a new ‘Retail Ombudsman’ has been greeted with mixed feelings. The response to this ‘new independent service to resolve disputes with supermarkets, high street brands and online retailers’ has been less then overwhelming. Like several other Ombudsman services it lacks teeth as it is unofficial i.e. not established or vetted by Parliament. Its adjudications are not binding on anyone unless they happen to subscribe to it, but if you do and it does find in your favour don’t feel too smug – the complainant can still take you to court.

So why establish a toothless Ombudsman?

So why establish a toothless Ombudsman? Apparently this is a mainstream retail response to the forthcoming EU ‘Alternative Dispute Resolution directive’ which will take effect in July. This says the retail sector must have an ‘Alternative dispute resolution body’ – but Parliament has already decided the new watchdog must be official i.e. vetted by the Trading Standards Institute. So whilst toothless in the interim it may morph into that in due course but the meantime is funded by subscriptions from 3,000 or so retailers who have signed-up to it. You can offer it as part of your Customer Care Charter which is one way to take pressure off your Customer complaints department. Especially if you run the notorious ‘No-help-whatsoever-desk’ at RyanAir which has an annoying habit of emailing an apology to your mobile and not accepting replies.

Although the new Retail Ombudsman may be a bit of a crock in terms of Consumer protection it’s a different thing if the Ombudsman is regulated e.g. for energy, financial advice, mortgages, insurance and savings. If you receive or want to make a complaint then go to http://www.ombudsmanassociation.org to see if there is a relevant ombudsman and if its findings are binding.




Meanwhile suitably-barmy advocates of ‘Workplace Wellness’ in the USA are hoping 2015 will be the year that ‘Standup Desks’ take off. These have been favoured by great minds such as Leonardo da Vinci and of course Michael O’Leary, the Chief Exec. of RyanAir. He once suggested RyanAir were considering ‘standing-only’ spaces on their flights and charging people to use the loo. Despite criticism from the Guild of Chairmakers, Joe Nafziger, the Californian inventor of Standup desks said “It’s definitely a worldwide thing that’s picking up speed”.

Advocates of ‘Workplace Wellness’ in the USA are hoping 2015 will be the year that ‘Standup Desks’ take off

Joe would love to hear your opinion of whether standing behind a stall all day in January is good for your health.


Some years ago a mate of mine was Sales director of an Engineering Company in the Midlands. The Company had grown off the back of supplying ‘gondola’ display racking to supermarkets. A big roll of galvanised steel went into one end of their factory and lots of uprights and shelves came out the other. Supermarkets were expanding like crazy and he’d shaved the margins when bidding for a mega-deal for 10 miles of racking for 40 new stores. He was understandably delighted to be invited to a contract-signing at a certain Supermarket’s head office but when shown into the boardroom found several competitors sitting at the table, all looking very hacked-off. Then in walked the Supermarket Head of Procurement who announced they would each be given an office, a telephone and one hour to reconsider their price. This was not a nice way to be treated. He lost the contract and his Company had too many eggs in one basket so went belly-up a couple of years later. Lesson learnt – the hard way.

Half-year profit forecasts to investors were being overstated by some £250m.

Quite a lot of hard-done-by suppliers may be taking quiet pleasure from Tesco’s problems at the moment – well the ones who can find another customer anyway. Back in September a whistleblower in Tesco’s finance department thought the new Chief Executive, Dave Lewis should be told that half-year profit forecasts to investors were being overstated by some £250m. When this profit warning was announced the institutional shareholders reacted in horror and the share price plunged. If you can’t trust the published accounts of a FTSE 100 Company then who can you trust? An internal enquiry was launched, payments withheld to former executives and others politely asked to step aside. Tesco has now handed the results to the Financial Conduct Authority amidst allegations that a small group of people in Britain’s biggest retailer deliberately misled its auditors to boost the trading accounts.

Tesco also confirmed withholding pay-outs worth millions of pounds to former Chief Executive Philip Clarke and former chief financial officer Laurie Mcilwee. The Serious Fraud Office is taking a keen interest and Tesco could face ‘significant fines’ and claims from investors says Mr Lewis. He is also wondering why he answered that job advertisement.

Screwing your suppliers is standard practice for any supermarket but Tesco seems to have refined the art. The allegation is they credited ‘product supplier discounts’ to an earlier accounting period than when actually received. This is naughty and contrary to the Groceries Supply Code of Practice as well as proper accounting standards. You can get away with it if sales turnover is rising and increased revenue in the next period cloaks it – but not if sales turnover is falling which is what’s happening at Tesco. These ‘discounts’ are demanded by Supermarkets in return for the retailer placing the suppliers product on the best shelf. ‘Eye line is buy line’ and all that – a bit like paying key money to get the best pitch next to your Market entrance.

Tesco’s share of the UK groceries and household goods market share has fallen from over 30% to 28%.

This little accounting irregularity is the icing on the cake for Tesco. Sales have been falling for several quarters largely due to German discounters Aldi and Lidl. Tesco’s share of the UK groceries and household goods market share has fallen from over 30% to 28% and the share price was already on the slide before this announcement. Chiselling £250 million or so out of your suppliers every 3 months is no mean feat but it seems likely someone told the auditors the discounts were already in the bank, not an anticipated receipt. Tesco shares which were nudging £5 a couple of years ago now stand at under £2.

So it looks like our Dave may need to raise cash to pay a hefty fine and reimburse shareholders who bought-in on fraudulent figures. Someone may even do porridge. Dave has now penned a long apology to Tesco Suppliers which looked good in the press and stopped them looking round for other retail outlets. It also softened them up for the next round of supply negotiations which are bound to follow. He might have to sell-off of an asset or two such as Tesco Banking or a juicy overseas operation. Cost-cutting in the UK such as a halt on new store openings had already been implemented by his predecessor Philip Clarke who switched to store refitting with posh coffee shops, restaurants and digital businesses. And falling sales.

Dave Lewis says he is a fan of ‘brand archaeology’ i.e. returning Tesco to its original roots. That sounds like he’ll focus on becoming Britain’s cheapest retailer once more and taking-on Aldi and Lidl. It’s the suppliers I feel sorry for.

Meanwhile the 5-yearly commercial property revaluation used to calculate business rates has been postponed yet again.

The last revaluation was due in 2013 but HM Government postponed it until 2015 claiming it would cause ‘uncertainty for businesses’. It’s now been postponed yet again until 2017 i.e. after the next election and assessments continue to apply based on pre-2010 rental values. The total revenue ‘take’ collected by the Treasury is supposed to remain the same but because many High Street businesses have collapsed thanks to online shopping etc the burden is going to fall on those that remain. The British Retail Consortium has kicked-off big time about the effect on their Supermarket members and the PM has promised a long-overdue review of this archaic system. To do so he’ll have to fight his way past all the HMRC District Valuers. Good luck.

In the meantime as a ‘Small Business’ which occupies only one premises you’ll hopefully remain clear of liability thanks to the Small Business Rates Relief Scheme. But this is due to expire in March 2015. It will be interesting to see if Chancellor George Osborne extends that to 2017. He’s bound to – isn’t he?

Happy Christmas!