Welwyn Garden City
1 Sep 2017
Three years ago today, Dave Lewis took up the role of Tesco Chief Executive.
Over the last three years, he and the entire Tesco team have worked tirelessly to turn the fortunes of the company around. I have been fortunate to work with the team for most of that journey and it is fair to say that Tesco is a very different business today than it was three years ago.
Dave has written to colleagues with his reflections on what we’ve achieved in that time, and I wanted to share his note here so that every stakeholder in our business can see the progress we’re making.
Of course, we still have further to go before our turnaround journey is complete, but I have total confidence that under the stewardship of Dave and his team, Tesco will continue to serve shoppers even better every day.
Time has flown by, but as we mark three years in our turnaround, it’s worth taking a moment to pause and look back on our journey so far. We know we have more to do, but we have come a long way and I wanted to share some reflections with you.
Three years ago we faced some very significant challenges. Fewer customers were coming through our doors, our volumes were down and our cost base was unsustainable. Perhaps worse still, our colleagues, suppliers and customers had lost trust in our brand and our business. We had disappointed ourselves and our investors with a series of profit warnings, our balance sheet had too much debt and we had ceased to pay a dividend.
We also very quickly had to deal with the discovery of an issue in our financial reporting in September 2014, which seriously harmed our business, and lost us the trust of many stakeholders.
These challenges had an impact on our reputation, on the morale of colleagues, and on our finances – but in true Tesco fashion we faced into these realities with objectivity and transparency. As a team we focused on four key things, even when this meant implementing some difficult decisions and enduring significant consequences.
We went back to our roots and listened to our customers and our colleagues. It led to the articulation of a new purpose – serving shoppers a little better every day – to guide everything we do:
As a result of our work, we’ve seen sustained improvements across all of our key customer metrics, and record levels of availability. Earlier this year we reported our third consecutive quarterly increase in the number of customers recommending us as a place to shop, backing up a strong performance of six consecutive quarters of sales growth, as well as a steady improvement in brand perception measures in the same period. It is also encouraging to note that earlier in the summer we were awarded The Grocer magazine’s Britain’s Favourite Supermarket award, as voted for by customers, for the third year in succession and picked up the prestigious Grocer of the Year award, judged by industry experts, for the first time since 2006.
We have completely rebuilt our commercial model, changing the way we work with our suppliers in order to focus on our customers:
In 2014 the Groceries Code Adjudicator (GCA) launched an enquiry into Tesco’s payment practices, prompted by the information we shared. In June, the GCA named Tesco as the most improved retailer in our relationships with suppliers in her annual survey – reflecting the huge amount of hard work from colleagues to get to that place. We were also ranked top in the independently run supplier Advantage survey, and our own internal Supplier Viewpoint shows that suppliers think we are easier to deal with and fairer partners than before.
To reduce our cost base, and allow us to focus more time and effort on serving shoppers better, we have simplified virtually every area of our business since 2014:
These changes have been incredibly difficult and have impacted many of you, and I am very grateful for the professionalism and commitment that you have shown throughout. At every point, we have aimed to make changes in the most respectful and considerate way we can, and they have always been made to put the focus back on customers – allowing us to invest in our offer and become more competitive.
Over the last three years, these four areas have allowed us to face up to the past, and set our business on a more sustainable path as we begin to rebuild profitability.
While the consequences of the accounting issues of September 2014 are still being felt and will be re-examined, particularly over the next few months, it’s important to remember that today we are a fundamentally different business to three years ago. We have faced into the consequences of our position and paid our fine to the Serious Fraud Office – having reached a Deferred Prosecution Agreement – and we have just launched a scheme to pay the necessary compensation to certain investors.
So it's time to look forward. We have plans to further improve the Tesco business for customers and colleagues, and of course we have the unique opportunity of our proposed merger with Booker and the aspiration to create the UK’s leading food business. Our focus now must be on maintaining our momentum and serving shoppers better – but we should be proud of what, together, we have achieved already.
Thank you for everything that you have done over the past three years.