Tesco (LSE: TSCO) announced last night that it had appointed a new chairman, John Allan, who will replace current chairman Sir Richard Broadbent from 1 March.
Mr Allans appointment could be the most high-profile board appointment we see this year but what should Tesco shareholders expect from their new chairman, who has a strong business track record, but has not worked in the supermarket sector since the 1980s?
Top choice?
Given that Tescos current chief executive, Dave Lewis, doesnt have any retail experience, many investors expected Tesco to hire someone with significant food retail experience to chair the firms board.
According to recent press reports, there were two other serious contenders for the job: Sir Ian Cheshire, the former chief executive of B&Q owner Kingfisher, and Archie Norman, who delivered a strong turnaround as chief executive of Asda in the 1990s.
However, its understood that both men turned down the Tesco chairmanship, for various reasons, leaving Mr Allan as the only serious contender.
Turnaround credentials
Mr Allans supermarket experience is now rather dated he was retail director in charge of marketing, buying and retail operations at former supermarket Fine Fare in the 1980s, when it was part of Associated British Foods.
However, more recently, Mr Allan has delivered a number of big deals and turnarounds that could bode well for Tesco shareholders: in the 1990s, he was chief executive of shipping and logistics firm Ocean Group, which merged with competitor NFC to form Exel, which was then sold to Deutsche Post.
In 2009, Mr Allan became chairman of Dixons Retail, overseeing a turnaround that saw the retailers shares five-bag from their 2011 low, before merging with Carphone Warehouse to form Dixons Carphone.
Big gains for Tesco shareholders?
Idont see a lot ofshort-term upside for Tesco shareholders: in my view, a lot of optimism hasalready been priced into the supermarkets shares since Mr Lewis took charge in 2014.
Indeed, based on the latest consensus forecasts, Tesco shares look quite expensive, trading on a 2016 forecast P/E of 22, and a prospective yield of 1.5%.
In the short term, I rate Tesco shares as no more than a hold but in the medium to long term, I remain a buyer, and believe that Mr Allans appointment is likely to be positive for shareholders.
Could Tesco end up taking over a smaller competitor and solidifying its position as the UK’s biggest supermarket?It’s not impossible — but investing in firms based on takeover hopes is highly risky.
If you’re interested in creating serious investment wealth, then I believe a more reliable strategy is to follow the 5 golden rules that could help you to build a lifetime dividend income.If you’d like to know more, then download “How To Create Dividends For Life“ today — this report is free and carries no obligation.
To download your copy immediately, click here now.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.
By providing your email address, you consent to receiving further information on our goods and services and those of our business partners. To opt-out of receiving this information click here. All information provided is governed by our Privacy Statement.
Roland Headowns shares in Tesco. The Motley Fool UK owns shares of Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.