Analysis: Five priorities for Tesco UK's new boss Matt Davies

Build on trading momentum

One of group chief executive Dave Lewis’s three priorities for Tesco is to regain competitiveness in the UK business, something that has already begun after the grocer’s UK like-for-like sales volumes rose for the first time in four years during the final quarter of 2014/15. Lewis said that was driven by better availability, service and pricing – and Davies is well versed in some of those fields.

Lewis is putting customers “back at the centre of everything we do” and that will suit Davies’ style. But with Tesco at the start of its road to recovery, Davies will be under immediate pressure to continue building that trading momentum and improve UK profits after they slumped 78.8% to £467m in 2014/15.  

Improve customer service

On paper, Davies is the perfect candidate to pick up the customer service baton from chief executive Lewis and ramp up the pace even further.

At Tesco’s full-year results, Lewis was keen to emphasise that more customers were buying more products more regularly in its UK stores, pointing to a net increase of 4,652 in-store staff as a key reason behind that upward trend.

In a world of promiscuous grocery shoppers, customer service can be a key factor in wooing back consumers lost to the discounters and so building sales. Davies will be fully aware of that and will no doubt draw on some of the principles of his Getting Into Gear strategy, which bore fruit at Halfords.

During his time with the car parts and cycles retailer, Davies opened Halfords Academies to provide the “training that colleagues need”, launched the 3-Gears scheme to reward customer service and dished out hand-held scanners to staff, allowing them to control stock and ensure products were always available for customers.

Build team morale

As well as a focus on customer service, the ability to develop high staff morale has also become synonymous with Davies. He has typically been determined to create a happy working environment and building a sense of team spirit at the retailers he has run.

During his time at Pets at Home, he encouraged workers to take their pets with them to head office. After making the switch to Halfords, Davies introduced regular Monday afternoon meetings to celebrate personal news including birthdays and weddings.

It was no surprise then that, under Davies’ tenure, both retailers were named among the 25 most desirable British companies to work for.

While there is no doubt that recreating that level of morale among the 266,000 staff at the UK’s biggest retailer will be a much greater challenge, you wouldn’t bet against Davies pulling it off.

Building his own team of trusted allies around him may help him to do this, so there could be a few more changes at the top following his arrival.

Hone Tesco’s offer

Another key part of Davies’ Getting Into Gear turnaround strategy at Halfords was to reassert the retailer’s proposition authority – something he dubbed ‘The H Factor.’

The retailer embarked on improving product development and design, stronger value and better space allocation – the latter two of which will be welcome at Tesco.

Lewis has already pledged to invest in service, availability and price rather than being simply “slaves” to a profit target. Davies will have a crucial role to play in establishing where and when such investment is required.

In terms of space allocation, filling larger sheds that have become out of kilter with modern shopping habits is a problem facing all the big four grocers. One of Davies’ priorities will be to decide how Tesco utilises its excess space, whether that be through increasing its non-food offer, sub-leasing space or signing partnerships with other retailers, a la the Sainsbury’s – Argos tie-up.   

Rebuild trust and transparency

Davies will be thrown in at the deep end as far as rebuilding trust and transparency is concerned – something Lewis highlighted as one of his three main priorities when taking the reins last September.

The fall-out from Tesco’s £263m accounting scandal continues, with ongoing probes by the Groceries Code Adjudicator, Serious Fraud Office and the Financial Reporting Council. All of that means there is little possibility of Davies enjoying much of a honeymoon period.

Although he helped turn Halfords around, the magnitude of the transformation job at Tesco UK will be unlike anything he has encountered in his career to date.

But if he can replicate the best of what he did at Pets and Halfords, a place in the retail pantheon could be on the cards.