Tesco hires turnaround man to steer recovery
today Feb 18, 2015
LONDON, United Kingdom - John Allan's credentials as a turnaround specialist have given the 66-year-old the chance to make his mark on Britain's cut-throat grocery industry as chairman of troubled Tesco, some 35 years after he left the supermarket sector.
Described by analysts as "a shrewd operator" and "a safe pair of hands", Allan joins Britain's biggest retailer armed with a CV packed with international experience, giving him the breadth of expertise outgoing chairman Richard Broadbent was seen by some to be lacking.
Tesco is still reeling from last year's four profit warnings and a 263 million pounds ($406 million) profit overstatement that sent its shares to a 14-year low. Broadbent said in October he would quit, carrying the can for the accounting scandal.
"Allan's turnaround experience may be highly valuable to Tesco," said Shore Capital analyst Clive Black.
As chief executive of logistics firm Ocean Group, Allan was the architect of its merger with rival NFC in 2000 that created Exel. As CEO of Exel, he oversaw its takeover by Deutsche Post in 2005, becoming finance director of the combined group, while as chairman of electricals group Dixons Retail he played a major role in its fight-back against online rivals and merger with Carphone Warehouse last year to form Dixons Carphone.
That merger has been a success, with the combined group's shares up 28 percent over the last six months, and all the reorganising could prove invaluable experience as Tesco battles to reverse years of underperformance in its main UK market.
Having started his career in the 1970s with Lever Bros and Bristol-Myers, maths graduate Allan cut his teeth in UK grocery, spending eight years at the now-defunct Fine Fare supermarket as retail director for marketing, buying and retail operations.
Three decades later Allan will start his 650,000 pounds a year job as Tesco chairman on March 1, tasked with running the board and restoring the firm's battered image with investors, while CEO Dave Lewis, who joined in September, continues with his plan to fight back from the market share losses, credit rating downgrades and the accounting scandal.
Though some Tesco shareholders and analysts had expressed a preference for Archie Norman, the former CEO and chairman of supermarket Asda and current chairman of ITV, Allan's appointment, announced after the stock market closed on Tuesday, drew a broadly positive reaction. Tesco shares rose up to 1.3 percent, although they closed down 0.7 percent.
"There's a decent turnaround reputation there," one institutional investor in Tesco told Reuters, noting Allan's appointment will take some of the pressure off Lewis, as he seeks to cut internal costs, including thousands of jobs, and sell assets to mend the company's finances.
"He (Allan) and the board as a whole will bring other ideas to steer the ship forward," added the investor.
But judging by an interview Allan gave the Mail on Sunday in 2009, he won't interfere with Lewis's strategy.
"It is terribly important, especially for chairmen who have previously been CEOs, that you do not attempt to be a substitute CEO," he told the newspaper.
"It is not the responsibility of the chairman and the non-executives to run the company but to ensure it is well managed, with good governance."
And there is some evidence Lewis's strategy, focused on price cuts and better customer service, is starting to work, with industry data published last week showing a first sales rise since January 2014.
Allan leaves Dixons Carphone with a glowing tribute from CEO Seb James, who said he was both "an excellent chairman" and "a valuable force for good on the board".
£1 = $1.54
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