Back to the future for Lewis

UNDER the leadership of Sir Terry Leahy, Tesco had a reputation for thinking ahead of the crowd. It was first into out- of- town superstores, first into convenience stores, first into eastern Europe, first online, and so on.

Then came the accounting scandal, the disgrace of former chief executive Phil Clarke et al, and a loss of mojo.

Former Unilever executive Dave Lewis has spent much of the last few years repairing the damage and rediscovering the power of doing things differently.

Lewis lucked out with Booker running rings around a soft-touch Competition and Markets Authority and benefiting from the collapse of tobacco wholesaler Palmer & Harvey. Indeed, it was Booker leniency which encouraged Sainsbury’s and Asda to unfurl a merger which would make the combined group Britain’s biggest grocer.

Meanwhile, Lewis continues to innovate, with Jack’s seeking to be the British version of Aldi and Lidl as own-brands make a big comeback in stores. Going down this route makes a great deal of sense.

With margins under pressure because of everyday price wars, own-brand merchandise allows grocers to control factories, improve the supply chain and be more in charge of profits. Unfortunately for Lewis and shareholders there is still a bit of legacy to deal with. Leahy had the grand ambition to broaden Tesco’s reach overseas so that 50pc of turnover was generated abroad.

That came unstuck with Fresh and Easy in the American West which gobbled up capital. One of his early moves after taking the helm was to pay down some of the debt accumulated partly as a result of overseas ventures, which meant selling the profitable Korean operation.

The difficulty with abroad is that it is hard for overseas retailers to have much traction with the host nation.

In the last six months Tesco has had local difficulty as Poland restored Sunday as the Sabbath, forcing shops to close. Thailand was hurt by an exit from cash-and-carry.

No one quite knows how Tesco’s other overseas commitment, a supply deal with French behemoth Carrefour, is going to work out. Failing to meet a profits forecast is a big sin in the City so Tesco shares took a drubbing in spite of encouraging like-forlikes and an underlying profit of £933m.

Putting this to one side, it is worth noting that a time when some analysts are delighting in writing off the high street Tesco demonstrates how, with rigorous and imaginative management, grocery retail is alive and kicking.

Sinking feeling

GETTING the price of initial public offerings right is always tricky. But efforts by Goldman to reinvigorate the market for British floats look a little aggressive.

The value of British luxury car maker Aston Martin, a regular over the decades in the London Gazette bankruptcy lists, skidded to around £4bn from the original £5bn. Just to put salt in the wounds Britain’s peer-to-peer lender Funding Circle also encountered bad traffic, with the value of the float sliding from the £2bn once contemplated, to £1.2bn in actual trading.

That is not very encouraging for other fintech innovators looking to chance their arm. The overpricing this time is different to when Goldman was involved in the Royal Mail IPO and took some of the blame, along with the Government, for mispricing.

With Royal Mail shares on a sharp downward trajectory the investment bank could claim that it was right all along.

Nevertheless, the faulty valuations for Aston Martin and Funding Circle suggest that new Goldman boss David Solomon might want to take a closer look at whether the London operation is as smart as it thinks. If he has spare time Solomon – a keen DJ – might persuade Annabel’s to give him a session on the turntables.

That should ensure as few Goldman jobs switch to Frankfurt as possible.

Dirty washing

THE gentle daily drip of opposition to Unilever’s proposed shift to Rotterdam is speeding up.

Latest to join the dissenters are governance mavens Royal London which says the change of listing would amount to ‘forced divestment’ of its holding.

The voting advisory service Pirc urges pension funds to oppose, and Reuters Breakingviews suggests a postponement to avoid a bloody nose.

Most voting intentions are still unknown but the ballot scheduled for October 26 is becoming a serious impediment to Unilever’s reputation for good governance.