As Tesco reports another profit warning, Retail Week takes a look at the steps incoming boss Dave Lewis will be considering to turn the company around.

Seven courses of action for new Tesco boss Dave Lewis

1) Dispose of non-core assets

Tesco has been accused of losing track of its core business as it diversifies beyond being just a grocer through investments in companies including Blinkbox, Giraffe and Harris + Hoole. As the company seeks to reinvest in its UK grocery business, a quick way for Dave Lewis to raise extra capital would be through disposing non-core assets. Lewis may want to assess how much value Blinkbox adds to Tesco and if it distracts from the turnaround plan. Do customers look to Tesco when they want to stream movies or music?  Tesco also owns customer insight company Dunnhumby, but a sell-off of this business would be a bold move considering it is behind Tesco’s heralded Clubcard.

2) Address the international businesses

Under Philip Clarke’s tenure Tesco offloaded the Japanese business and its loss-making US operation Fresh & Easy. However, this is not the end of Tesco’s headaches overseas. The company’s Turkey business is also struggling and Clarke’s attempts to offload the operation came to nothing after talks fell through. Lewis will have to take decisive action as he prepares to throw himself into the UK turnaround, so an exit from underperforming countries could be on his agenda.

3) Change the management structure

Unfortunately the buck does not stop with Clarke and questions remain about the culpability of the rest of the senior management team. Shore Capital head of research Clive Black says he expects that under Lewis “there will be considerable senior management change… as Tesco needs a world class top team to take it forward”. Black argues the grocer needs “fundamentally better management” and Lewis may bring in some big hitters from the retail world because of the Unilever lifer’s lack of direct retail experience.

4) Update the price proposition

The Tesco price proposition has been seriously damaged by the discounters and there is a perception among customers that the grocer’s price battle is a phoney war. As one shopper pointed out to Retail Week, he feels like he is getting ripped off when shopping with Tesco. Retail commentator Steve Dresser suggests one solution could be to bolster the Tesco Price Promise by instantly offering the customer the difference in cash at the checkout.  The grocer’s Everyday Value Range is cheaper than Aldi’s, but its core own brand range is more expensive. Nomura believes Tesco could raise the prices of its value range and still compete with Aldi, while bringing down the price of its core range to squeeze Aldi from both sides.

5) Do nothing

Some have suggested that Lewis should hold off from any immediate action and spend a significant amount of time in stores, learning about the business. Retail tweeter @BeansJust said Lewis should “just spend six months working in stores and depots before making any decisions”. Fellow Twitter user Arhi Kivilahti took up that theme and evoked Lou Gerstner’s turnaround of IBM in the 1990s. He went against all advice to take 100 days to understand IBM’s problems in 1993. Lewis could well learn from Gerstner’s famous quote: “The last thing IBM needs right now is a vision.”

6) Focus on customer service

Tesco used to be famed for its customer service, epitomised by its Every Little Helps mantra. Ad agency executive Marc Cave, who helped develop the Every Little Helps tagline, told Retail Week in July that he can now “smell the lethargy when I walk into my local Tesco Express”. Lewis may look to increase the number of staff in-store to improve customer service. To keep costs down while still boosting staffing levels at peak hours Lewis could reduce some of the stores’ opening hours. “The question for Dave Lewis is do so many stores need to open 24 hours?” asks Dresser.

7) Re-establish a strong brand identity

Tesco throughout its history has always had a strong brand identity, but this has slipped away. The company considered dropping its ‘Every Little Helps’ strapline during its advertising account review, but decided to stick with it. Since then it appears to have done little to live up to the slogan. Cave believes Tesco can rediscover its purpose by emulating the 114-point Every Little Helps manifesto it created in the 1990s. Innovations ranged from training staff to pack customers’ bags to fixing wobbly trolley wheels. Once it has a manifesto in place Tesco and Lewis will have something to shout about and a proposition to build a recovery on.