Shore Capital upgrades Tesco to 'hold', welcomes Lewis as new CEO

21st Jul 2014 10:00

A profit warning from Tesco may result in more downgrades, but Shore Capital has upgraded its rating on the supermarket stock from 'sell' to 'hold' after the resignation of Chief Executive Officer (CEO) Philip Clarke on Monday.Tesco said current trading conditions "are more challenging than we anticipated" and that sales and profits in the first half will be "somewhat below expectations".Clarke "agreed [...] that this is the appropriate moment to hand over to a new leader", the company said as it appointed Unilever exec Dave Lewis as his replacement. Lewsi is currently the President of Unilever's Personal Care division, will succeed Clarke as CEO in October."With this important development we sense that the market will broadly welcome the change in management, which is a melancholy point to make given the hard and extended graft that Philip Clarke has put into Tesco," said Shore Capital analysts Clive Black and Darren Shirley."However, sadly, we feel that there has been a feeling of inevitability about developments at Tesco in recent times, and as such with this news we would expect the market to offset the disappointment of the downgrades with a sense of relief that the group is entering a potentially more effective chapter in its development."They expect Tesco to follow up the CEO change with further adjustments to the executive team "in time", including a possible "considerable reconfiguration of the group and executive boards"."Hence, in expectation that the bull will be grabbed by the horns, even with more potential restructuring, we upgrade our recommendation on Tesco from 'sell' to 'hold' and for the sake of the group's shareholders wish Mr. Lewis well," the analysts said.Tesco was trading around 2.1% higher at 290.85p by 09:58.BC