Yet another director has been toppled in Tesco’s bid to turn itself around. Michael Holmes was in charge of the division containing the supermarket’s Giraffe restaurant chain, Harris + Hoole coffee shops and Euphorium Bakery.
His departure further reinforces the idea that Tesco is keen to draw a line under the era of its previous chief exec Philip Clarke. He spent a pretty hefty chunk of cash investing in these businesses on the insistence that it would help turn Tesco’s stores into more of a ‘destination’ where people would happily while away their afternoons.
It wasn’t a totally ludicrous idea – from trendy Boxpark in London’s Shoreditch to flagship megashops on Oxford Street, making shopping more fun and immersive is the way a lot of retailers are going. But given the rising fortunes of Aldi and Lidl, it seems Tesco chief exec Dave Lewis has deduced that his average customer is more interested in the price of milk than a hand-crafted artisan Campaillou loaf or a frothy coffee.
The fate of the three companies is unclear. All made a pre-tax loss in their latest accounts and Lewis has made it clear that he plans to trim the fat. It would be a shame if they were to fold as they're all the product of entrepreneurial talent.
Giraffe was founded in 1998 by wife and husband Juliette and Russel Joffe and Andrew Jacobs and was later part-owned by private equity firm 3i and restaurant entrepreneur Luke Johnson. Tesco acquired the chain, whose menu features dish from around the world, in 2013 for £48.6m. In the year to February 2014 it made a pre-tax loss of £147,000 on a turnover of £44m. In that respect it’s in relatively healthy shape compared to the other two companies.
Harris + Hoole
The coffee shop chain attracted controversy for supposedly misleading customers into thinking it was independent, when it was actually 49% owned by Tesco right from the get-go. The supermarket launched the chain as a JV with the Tolley family who already ran a chain of coffee shops. It might have made sense for them to buy the rest of H+H from Tesco, had it not made a pre-tax loss of £12.8m on sales of £6.6m in the year to February 2014.
Tesco killed off a lot of its in-store bakeries in the last year or two, replacing them with cakes and bread from Euphorium, in which it’s acquired an undisclosed stake. Undoing this work would cost a lot of dough, but the chain made a loss of around £8m on an £8m turnover in the year to Feb 2014, so it certainly poses a headache for Lewis. The bakery was founded by Daniel Bear in 1999.