Former Tesco boss Sir Terry Leahy once described Ocado as a “charity” due to its history of losses during the 2000s.
Ocado has eclipsed Tesco as the supermarket’s new general manager, Ken Murphy, prepares to take orders on Thursday. He replaces Dave Lewis who has run the UK’s largest retailer since 2014.
Murphy faces a baptism of fire as Tesco grapples with the recession, running supermarkets during a pandemic and a possible no-deal Brexit. He must also change the course of action, which has slipped under Lewis.
Tesco’s board of directors is painfully aware of the development of the Ocado share price. Over the summer, the company suffered one of the biggest shareholder revolts over executive compensation. Shareholders opposed a late change to part of an executive compensation plan, which handed Lewis an additional £ 1.6million and £ 900,000 to CFO Alan Stewart.
The change involved removing online grocer Ocado from a comparison group against which Tesco’s stock performance was measured. With Ocado included, the two men would not have qualified for the additional payment.
Investors have fallen in love with Ocado thanks to the success of its technology company Ocado Solutions, which sells its grocery selection expertise to overseas supermarkets. The coronavirus pandemic has also triggered a boom in online shopping. At the height of the pandemic, online food sales nearly doubled but, despite the recent slowdown, they now account for 12.5% of total grocery sales compared to around 7% before the crisis.