Update: ‘Outsider’ hope for troubled Tesco as Clarke departs

PUBLISHED: 14:06 21 July 2014

File photo dated 27/02/13 of Tesco's Chief Executive Philip Clarke who is to step down in October. PRESS ASSOCIATION Photo. Issue date: Monday July 21, 2014. See PA story CITY Tesco. Photo credit should read: Rui Vieira/PA Wire

File photo dated 27/02/13 of Tesco's Chief Executive Philip Clarke who is to step down in October. PRESS ASSOCIATION Photo. Issue date: Monday July 21, 2014. See PA story CITY Tesco. Photo credit should read: Rui Vieira/PA Wire

PA Wire/Press Association Images

Tesco ditched beleaguered chief executive Philip Clarke today as it recruited an outsider from consumer goods giant Unilever to try to restore its fortunes.


Tesco chief executive Philip Clarke, who worked his way up from the shop floor to lead Britain’s biggest supermarket, is to leave the business following another profits warning.

His time in charge coincided with an unprecedented period of pressure on the established “big four” players as discounters captured a bigger share of the market.

Here is a timeline of Tesco’s performance since Mr Clarke took the helm in 2011.

• February 2011

Sir Terry Leahy steps down as chief executive on his 55th birthday after 14 years in charge, overseeing a leap in pre-tax profits from £750 million in 1997 to £3.4 billion at the group’s last set of annual figures in April 2010. His record includes the launch of and premium range Tesco Finest and its expansion into America with the Fresh & Easy chain. The market share of the group stands at 30.5pc.

• January 2012

Less than a year into Mr Clarke’s tenure, Tesco shocks the market with its first profit warning in almost 20 years after poor Christmas trading. Shares plunge by as much as 15pc, or more than £4 billion. Tesco, in common with the country’s three other leading grocers - Wal-Mart’s Asda, Sainsbury’s and Morrisons - finds itself squeezed by discounters Aldi and Lidl and upmarket grocers Waitrose and Marks & Spencer.

• April 2012

Tesco unveils a £1 billion UK revival plan, which includes upgrading stores, the recruitment of more staff and better prices and value. The initiative follows complaints that its 2,800 stores are cold and industrial with poor levels of service.

• April 2013

The retailer reports its first fall in annual profits in 19 years, with post-tax profit tumbling almost 96pc to £120 million from a year earlier. The figure is hit by a £1.2 billion charge on the retailer’s US Fresh & Easy chain of around 200 stores as it confirms it will leave the country. The firm also suffers a £804 million write-down in the UK on land for more than 100 major stores, bought at the height of the property boom, which will no longer be developed.

• February 2014

The supermarket promises to spend an additional £200 million on lower prices for basic products, such as carrots, tomatoes, onions, peppers and cucumbers. It will also rein in annual capital spending to no more than £2.5 billion for at least the next three years as a result of the dramatic reduction in store expansion - nearly half the £4.7 billion spent in 2008/09.

• April 2014

Mr Clarke brushes off speculation about his future despite little sign that his £1 billion plan to turn around the retail juggernaut is bearing fruit. Profits fall 6.9pc to £3.05 billion for the year to February 22 while fourth-quarter like-for-like sales slump by 3pc as its UK market share falls to 28.6pc in the 12 weeks to March 31, from 29.7pc in the same period a year earlier.

• June 2014

Till-roll figures from Kantar Worldpanel show a decline in Tesco’s market share to 29pc in the 12 weeks to May 25, compared with 30.5pc a year earlier. A day later, the chain reports a 3.7pc fall in like-for-like sales for the first quarter of its financial year. It is a performance that Mr Clarke admits is the worst he has seen in four decades at the supermarket chain. At the company’s annual meeting, chairman Sir Richard Broadbent asks shareholders to give management more time to complete their turnaround plans.

• July 2014

Tesco announces that Mr Clarke will step down from the board on October 1 to be replaced by Unilever executive Dave Lewis. Sales and trading profit in the first half of the year are “somewhat below” expectations, the company adds.

Shares in Britain’s biggest supermarket rose 3pc as the City cheered the announcement, which comes weeks after Mr Clarke, 54, admitted that its latest sales performance was the worst in 40 years.

New boss Dave Lewis, 49, takes over in October with a £1.25m basic salary and a £525,000 golden hello in lieu of his Unilever bonus.

Meanwhile, a party due for tomorrow to celebrate Mr Clarke’s four decades at the firm has been cancelled.

The announcement of his departure came as the supermarket warned that continuing pressure on the grocery market combined with the cost of investments meant that sales and trading profit for the first half would be “somewhat below expectations”.

Tesco has been battling with intense competition from discount rivals Aldi and Lidl and a squeeze on household budgets.

The group highlighted the need for change by saying any improvements for the current 12-month period would be partly reliant on “steps that may be taken during the remainder of the year to improve our customer offer further”.

Mr Clarke took over in March 2011. His predecessor, Sir Terry Leahy, had seen a transformation in Tesco’s fortunes as profits surged during his 14 years in charge - though there have since been question marks over his legacy.

But at the start of 2012, Mr Clarke shocked the market with the group’s first profits warning in 20 years. It prompted the launch of a £1 billion turnaround plan but latest annual results showed annual earnings down for the second year in succession.

This was followed by like-for-like sales for the first quarter to May 24 falling by 3.7pc, the third quarter in a row of worsening falls, and today’s profits warning.

Tesco chairman Sir Richard Broadbent said: “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.”

Mr Clarke said: “Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.”

The appointment of Mr Lewis brings to an end a tradition of long-serving insiders being given the top job at Tesco, with the job previously held by Sir Terry and before him Lord MacLaurin.

Mr Clarke, who worked his way up from the shop floor, will be replaced by Mr Lewis in October but stay on in a support role until January, and receive a year’s salary on departure.

Tesco said: “The board are deeply grateful to Philip for his contribution to Tesco, over the last four decades, as well as more recently as chief executive. His has been an outstanding achievement.

“Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development.”

Neil Shah, analyst at Edison Investment Research, said: “Dave Lewis’s arrival as new CEO from Unilever sends a clear signal that Tesco knows it has to get back to basics and address the value of its brand to consumers.

“Under Clarke’s leadership, with successive falls in quarterly sales, there is a sense that Tesco has simply lost its sense of self. Expect a root-and-branch review in the way Tesco markets its brand across all products and all retail channels.”

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “The task ahead for the new chief executive remains sizeable. The march of the discounters Aldi and Lidl continues.

“The question now will be whether the new chief executive will have the courage to take early aggressive action, potentially going toe to toe with the discounters and impacting earnings, at least in the short term.”

Clive Black, of Shore Capital, said a shift in Tesco’s trading strategy under the new boss could have “considerable implications” for the sector.

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