Global challenge for the new boy
TESCO’S longstanding chief executive Sir Terry Leahy surprised the market yesterday by announcing plans to retire early after 14 years at the helm.
Former shelf stacker Phil Clarke, the relatively low profile head of the international division, has been anointed his successor, marking the importance of the overseas businesses to Tesco’s future growth.
The group is now in 14 different countries and employs 472,000 workers in 4,811 stores worldwide and on some measures is now the world’s third largest grocer.
Clarke’s appointment comes at a time of unparalleled change at the top of Britain’s grocery giants.
New faces have arrived at Morrisons and Asda, while Marks & Spencer, as influential in the food as it is in women’s knickers, has also appointed a successor to Sir Stuart Rose.
Whether it is moving into banking or setting up on the internet, Tesco have always been commendably cautious. And so it will be with the handover of responsibilities from Leahy to Clarke, which will take nine months.
The current boss will head for retirement next March, some three years earlier than when many had expected him to depart.
Leahy has enjoyed a phenomenal career, joining a business that was the No.3 grocer in the UK and helping to grow it into a giant of the international stage. ‘ Tesco has been my whole life,’ said Leahy. ‘It will always have a special place.’
The shares dipped 9.7p to 397.4p, wiping almost £778m off the value of the supermarket group and revealing just how highly Leahy is prized. Dave McCarthy, the retail analyst at City firm Evolution, said: ‘Tesco is losing its best player and therefore the team is weakened.’
But Clarke, a Tesco lifer, probably bleeds blue and red, the company’s trademark colours. As a 14-year-old he worked at his local Tesco where his father was store manager.
After graduating in economics from Liverpool University he joined Tesco’s management training scheme, working in the UK business, logistics and then the international division. He was appointed to the board i n 1998 and will become only the sixth chief executive in the firm’s 91-year history.
Leahy will be a tough act to follow and Clarke will take up his role at a pivotal period for the business. The industry is heading for its most difficult time in years. Rivals are doubling their store-opening programmes in emerging markets in a dash to establish their brands and gain market share.
Underlying sales across the industry are currently negative as discretionary income is falling. And shoppers are bracing themselves for tax hikes as governments tackle worldwide debt mountains.
But the biggest single strategy decision Clarke has to make is on the long-term commitment to American start-up Fresh and Easy. The fledgling business, established to take on Wal-Mart in its own back yard, is a drain on profits and has so far accumulated a £400m loss.
It was very much Leahy’s baby, and the departing retail chief was so confident in its success he linked his bonus to its performance.
Tim Mason, head of Fresh & Easy, has been given the additional title of deputy chief executive, which is seen as a sop to keep him at Tesco. But it is also part of a wider boardroom shake-up. David Potts will become the first chief executive of the growing Asia business while Richard Basher, currently commercial director, will assume the newly-created role of chief of the UK business. Evolution’s McCarthy said: ‘Over half the board will have changed responsibilities in 2011.’ But as for retail director Andy Higginson and finance boss Laurie Mcllwee, who were top leadership contenders, chairman David Reid was fresh out of special offers.
Clarke will be hoping they stay as he takes up his new position.
Former shelf stacker Phil Clarke has bagged the top job and will replace Sir Terry Leahy next year