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Tesco investors revolt over 拢6.4m pay packet for outgoing boss

The food retail giant says it is "disappointed" after more than two-thirds of votes are cast against the remuneration report.

Tesco CEO Dave Lewis
Image: Some investors were reluctant to criticise, as Mr Lewis has driven a major turnaround at Tesco
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Tesco shareholders have rejected the supermarket's pay deal for directors, including its 拢6.4m pay packet for departing boss Dave Lewis.

The food retail giant said it was "disappointed" after more than two-thirds of votes, 67.3%, at its annual general meeting were cast against its proposed executive pay deals.

Ahead of the meeting, several major investor groups had called on shareholders to , pointing out that removing the online grocer Ocado from the peer group against which it measures its performance inflated Mr Lewis's bonus from £800,000 to £2.4m.

Tesco
Image: Although not binding, the vote represents a blow to Tesco

However, the vote was advisory, rather than binding, and so will not affect Mr Lewis's remuneration package.

Nevertheless, it represents a blow to Tesco's reputation at a time when executive pay is again firmly in the spotlight, with rising unemployment across the economy, and millions of workers forced to take significant pay cuts under the emergency furloughing scheme.

The issue had divided opinion among investors, with some reluctant to criticise Mr Lewis's financial package after he has driven a major turnaround of the company following an accounting scandal in 2014.

The board said in a statement it was "disappointed that the advisory vote" was not passed, but committed to "continue to engage with shareholders to fully understand their concerns".

More on Covid-19

It came after Tesco revealed sales had surged over the past three months driven by a sharp rise in customers shopping online during the coronavirus lockdown.

The supermarket giant said sales were up by 8% to £13.4bn in the quarter to May.

The group said this had been bolstered by a 48.5% hike in UK online sales for the period covering the COVID-19 crisis, soaring by 90% in May alone.

Responding to the coronavirus-triggered demand, Tesco said it had doubled its online capacity over a five-week period and was now fulfilling more than 1.3 million orders per week.

Across the quarter as a whole, it delivered 12.6 million orders, including to a priority list of 590,000 vulnerable customers.

Tesco Delivery Driver Paul Bradbury
Image: Tesco's online sales soared by 90% in May alone

As well as home deliveries, there has also been an expansion of the click and collect service, making up around a quarter of online orders.

As a result, Tesco's online grocery business had grown from 9% to more than 16% of its total UK sales.

The chain also said it expected its bill for dealing with the COVID-19 crisis would top £840m for the full year.

This included the provision of twelve weeks' paid leave to 26,000 vulnerable staff, as well as the recruitment of 47,000 temporary employees to cover absence and meet increased demand.

There was also the cost of re-opening previously mothballed distribution centres.

However, it pointed out this outlay would partially be offset by the UK business rates relief of £532m and additional food sales.

The figures came during the final update by Mr Lewis, who will be replaced by Ken Murphy at the end of September.

Mr Lewis said: "Through a very challenging period for everyone, Tesco colleagues have gone above and beyond, and I'm extremely proud of what they've achieved.

"Their selfless efforts, combined with our embedded strategic advantages in stores and online, have helped to ensure that everyone can get the food they need in a safe environment.

"The costs of doing this have been significant and only partly offset by business rates relief and increased volume.

"We see the balance as an investment in supporting our customers at a time when they need it most."

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Responding to the Tesco figures, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Tesco's confirmed we're shopping less often, but stocking up on more items when we do enter a supermarket.

"This isn't a surprise given that entering busy shops is something we're less inclined to do than a few short months ago.

"This change in habits has tangible benefits for Tesco, because its bigger stores and range of products are likely behind the higher number of customers switching to Tesco from discounters like Aldi.

"Looking beyond the pandemic the key will be keeping hold of these customers, their loyalty is temporary until proven otherwise."