By Saabira Chaudhuri
LONDON-- Tesco PLC shareholders on Friday expressed outrage
about the worst year in the British retailer's history, even as the
company delivered signs that its turnaround plan is beginning to
bear fruit.
At Tesco's annual meeting--the first for most of Tesco's board,
including Chief Executive Dave Lewis and Chairman John
Allan--shareholders slammed the board for the company's performance
over the past year, during which Tesco's share price plunged
21%.
"When we bought shares, Tesco was the Rolls-Royce of grocery
retail," said private shareholder Anthony Lee. "You've become the
Ryanair of grocery retail," he added, referring to the budget
European airline.
The meeting followed stronger-than-expected results from Tesco,
sending shares up 3.6% in afternoon trading. For the three months
through May 30, U.K. same-store sales excluding petrol fell 1.3%
from a year earlier, which is better than the 2.3% drop forecast by
analysts at Barclays. International sales dropped by 1%, leaving
Tesco with an overall decline of 1.3%.
"It's the U.K. that matters for Tesco's long-term health and
here Tesco delivered a handsome beat," said Exane BNP Paribas
analyst John Kershaw. "Tesco evidently is gaining traction with
customers."
But following a year for which Tesco reported the worst results
in its 96-year history and equity fell by more than half to GBP7.07
billion ($11.12 billion), shareholders in London weren't in the
mood to applaud.
During the nearly three-hour-long meeting, shareholders
repeatedly asked the board why it doesn't guarantee staff members a
living wage, given that Mr. Lewis earned GBP4.1 million during his
first six months at the company. Mr. Lewis said he was "very aware
of the opportunity to sign up to the living wage" but didn't say
Tesco would do so.
Shareholder Ivanhoe Norona, who also works as a Tesco
deliveryman, spotlighted the board's composition. Tesco's
all-Caucasian board of 10 members includes just one woman, Deanna
Oppenheimer. "It's just unusual to see so many similar faces," he
said. "I've never seen people like you come into the store."
Ms. Oppenheimer, chairwoman of Tesco's remuneration committee
and a former Barclays PLC banker, also came under fire. Shareholder
Michael Mason asked whether Tesco's money was best spent on flying
her in from the U.S. for board meetings, at a cost of GBP56,000 in
the past fiscal year. "It's a luxury we can't afford," he said.
There were some humorous moments. One shareholder insisted he
wasn't a Scotsman but a Londoner following an attempt by Mr.
Allan--who is half-Scottish--to highlight their common origins.
Another offered to serve on the board free after listing his
accomplishments, including a 2006 appearance on the U.K. game show
"Deal or No Deal."
Tesco on Friday reported U.K. volumes rose in the first quarter
by 1.4% as 180,000 more customers shopped with it. "Our
first-quarter results represent another step in the right
direction," Mr. Lewis told reporters. "Clearly, customers are
noticing that we're investing in the offer."
Under Mr. Lewis, Tesco has been working to regain some of the
traction it had before a period of slumping sales hammered profit,
while the company's reputation was tarnished by an accounting
scandal. The company cut prices on more than 300 products during
the quarter and has reduced the number of product lines in stores
by up to 20% as it works to simplify its offering and make space
for the most popular products.
Mr. Lewis said he expects to see deflation for the foreseeable
future and warned that there is "still an awful lot of volatility
out there as we change quite a lot in our business."
In Asia, Tesco posted a 3% decline in same-store sales as its
two largest markets, South Korea and Thailand, saw this metric
decline by more than 3% and 2%, respectively.
Tesco offered no updates on the pending sale of its data unit
Dunnhumby or on whether it will sell its South Korea business,
other than to say it wouldn't move without the right price. "Any
reshaping of our portfolio will only be done on a full-value
basis," Mr. Allan said.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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