Tesco boss to exit after profit warning

Comment on this story
Tesco REUTERS Branding for a Tesco store is seen in west London.

London - Tesco boss Philip Clarke is to quit after Britain's biggest retailer warned it would miss profit forecasts, bringing an abrupt end to a disastrous three year reign.

Clarke, who has spent more than 1 billion pounds ($1.7 billion) on a failed turnaround plan, will be replaced on October 1 by Unilever executive Dave Lewis, who is credited with revamping a number of businesses at the consumer goods group.

The darling of the retail sector during two decades of uninterrupted earnings growth, Tesco started losing ground in its main UK market in the final years of long-standing chief executive Terry Leahy.

More recently it has been squeezed between discounters Aldi and Lidl at the one end and upmarket grocers such as Waitrose at the other, and hurt by the slowest growth in the overall UK grocery sector for a decade.

Its attempts to respond were hampered by costly mistakes abroad, including a failed expansion into the United States, originally a Leahy initiative.

Clarke, a 40-year Tesco veteran who started as a teenager stacking shelves in a store managed by his father, fought back with a wide-ranging plan including cutting prices as well as revamping stores and product ranges, but the firm's market share has continued to decline.

“The result of trying to change everything was that he achieved little and both customers and shareholders were let down,” said Phil Dorrell, director of consultants Retail Remedy.

Bruno Monteyne, retail analyst at Sanford C Bernstein, said Tesco needed to better tailor its offering to local markets, which could include value, mid-market and high-end stores.

“The minimum expectation we would have is that he (Lewis) brings a completely new pair of eyes, a new strategy to Tesco, and that might be better coming from another company,” he added.

Reflecting optimism about the change in command, Tesco shares, which had been languishing near 10-year lows, rose around 3.5 percent in early trade.

At 10:10 SA time, they were up 1 percent at 287.95 pence.

“UNILEVER'S LOSS”

Jefferies analyst Martin Deboo said Lewis had been viewed in some quarters as the heir apparent to Unilever chief executive Paul Polman, and had a track record of turning round businesses in Argentina, Indonesia and also Britain.

“Tesco's gain is Unilever's loss,” Deboo said.

“He (Lewis) knows the UK grocery industry very well from the supply side, which is an advantage. He's smart, entrepreneurial and commercial but at the same time he's unpretentious. I think he'll be a good leader and a good cultural fit.”

Lewis was chairman of Unilever UK and Ireland from 2007 until 2010, when he became president of the Americas.

He took on his latest role as head of personal care products in 2011.

Lewis will work alongside new Tesco finance chief Alan Stewart.

He quit Marks & Spencer earlier this month but may not start at Tesco for six months due to a non-compete clause in his contract.

“Philip Clarke agreed with the board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile,” said Tesco Chairman Richard Broadbent, who had backed Clarke as chief executive at the firm's annual shareholder meeting only last month.

Tesco, the world's third-biggest retailer behind France's Carrefour and US industry leader Wal-Mart, said trading had turned tougher than expected at the time of its first-quarter update on June 4, and that sales and trading profit in the first half of the year were below expectations.

Clarke, who had told reporters on June 4 “I'm not going anywhere” and privately talked of staying in the role for another four or five years, said on Monday “this is the right moment to hand over responsibility.”

Tesco said the outlook for its full financial year would be influenced by the extent to which benefits from the investments it is making begin to be seen, by conditions in the overall market and by any steps that may be taken during the remainder of the year to improve its customer offer further. - Reuters


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.