David Lewis has shocked the City by quitting Tesco. What’s next on the menu for the revived retail titan?

The supermarket that ate Britain has recovered from its indigestion under Lewis, writes James Moore. Investors will want his replacement to chow down on growth

Tesco CEO David Lewis has revived the business (Getty)

Britain’s ongoing political crisis has rather eclipsed a fairly frenetic series of City announcements in recent days. But even the Conservative conference speech by Britain’s vandal prime minister couldn’t entirely overshadow the one from Tesco.

David Lewis, the man who cured the supermarket that ate Britain of a horrible case of indigestion and got it chowing down again (up to a point), is set to depart in a move almost no one saw coming.

There’d been none of the usual speculation about successors and careful prepping of the ground one often sees in the run-up to the exit of a longstanding and successful CEO.

On the other hand, it does say something about the way Tesco’s boardroom has been revived alongside the business, that Lewis’s external replacement was sought out and settled upon so that their identity could be revealed on the same day as the departure was announced. All that and a fairly punchy set of interim results.

That replacement is Ken Murphy, who will join Tesco next year from Walgreens Boots Alliance, which owns Boots the chemist among other things.

When a CEO of Lewis’s standing unexpectedly announces their departure without a job to go to, cites a “personal choice”, and talks about needing to recharge his batteries, people are naturally inclined to be curious.

The fortunes CEOs make afford them the opportunity of seeking out a nice beach at a time of their choosing. They just aren’t wired to do that. They wouldn’t be CEOs if they were.

Lewis said he “honestly did not know” whether he wanted another corporate role having spent three decades at Unilever prior to taking the top job at Tesco.

We have no choice but to take him at his word. However, if the 54-year-old does decide he wants one it will surely be there for him.

Tesco was reeling from an accounting scandal when he joined, with the public and the City having fallen out of love with the lumbering, charmless beast it had become under Philip Clarke.

Lewis set about shaking the place up, and how. He’s got the dividend motoring, done a major deal (the merger with wholesaler Booker), revived sales and profits, and rekindled some of the City’s and the shopper’s enthusiasm for the business. Phew!

It hasn’t gone all his own way. The nationalistic discounter Jack’s has proven to be an underwhelming addition to Tesco’s portfolio. And his surgery has not been without cost. Thousands of jobs have been axed along the way. There are parts of the workforce that won’t be as sorry to see him go as his investors. They paid him the ultimate compliment by marking the shares down after his departure announcement hit the City’s screens.

A point made by Lewis is that a CEO’s term should be finite, and last for maybe five to seven years. The average is a bit less than that, so it was well made. He’ll have done six by the time of his departure.

His chair John Allan says he was told of the plans some months ago. They left the latter in a tough spot. The natural successor to Lewis was seen as Charles Wilson, who had run Booker prior to the merger. However, he’d stepped back from running Tesco’s UK arm due to illness.

The other senior candidates were seen as needing a little more seasoning in their posts, hence the external hire of Murphy.

His challenge might not look as tough as the one faced by Lewis when he joined – but in many ways it is. He has to live up to the standards set by his predecessor, who is quitting while he’s ahead, just as his predecessor bar one, Sir Terry Leahy, did. That’s an underrated skill.

Lewis will at least be around to see the business through Brexit, if it happens, which would be a tough ask for anyone.

But notwithstanding that fly in the ointment, the business is entering a new phase. It’s been fixed. It’s making good profits and the dividend is motoring but it is still operating in a brutally competitive market into which Aldi and Lidl are continuing to expand. Investors will be inclined to ask, what next? Where’s our growth going to come from?

Those are different questions to the ones Lewis was asked when he joined. Murphy’s tenure will be defined by how he answers them.