Tesco calls in turnaround specialist to revive fortunes
Chairman Richard Broadbent said it was time to hand over to a new leader “with fresh perspectives and a new profile.”
The move comes weeks after Mr Clarke admitted that Tesco’s latest sales performance was the worst in 40 years.
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Hide AdThe new chief executive 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.
Mr Lewis is credited with revamping a succession of businesses at the consumer goods group and is currently its global president of personal care.
Once the darling of the retail sector during two decades of uninterrupted earnings growth, Tesco started losing ground in the UK in the final years of long-standing CEO Terry Leahy’s tenure.
Mr Clarke, who has spent more than £1bn on a failed recovery plan in the UK, issued his first profit warning in January 2012.
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Hide AdAnalysts said the appointment of a non-retailer and the first outside CEO in Tesco’s 95-year history could herald a major strategy re-think, which could include big price cuts to win back customers.
The announcement of Mr Clarke’s 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 German discount rivals Aldi and Lidl and a squeeze on household budgets.
It has also been hit by its exposure to large out-of-town stores in the UK at a time when more shoppers are buying online and in convenience stores.
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Hide AdThe days of one big weekly shop have been replaced by several smaller shopping trips during the week.
Tesco has also been hit by costly mistakes overseas including a failed expansion into the US.
Mr Clarke fought back with a wide-ranging plan including cutting prices, revamping stores and product ranges and investing in internet shopping and technology, but the firm’s market share and share price have continued to fall.
According to research by Kantar Worldpanel, Tesco’s market share dropped to 28.9 per cent in June from 30.7 per cent when Mr Clarke took over in March 2011.
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Hide AdDuring the same period, Aldi grew to 4.7 per cent from 2.1 per cent and Lidl to 3.6 per cent from 2.5 per cent, while Sainsbury’s and Leeds-based Asda – Tesco’s main rivals – remained largely stable.
Analysts said Mr Lewis’ 27 years at a major supplier to the retail sector could help negotiate better prices and that his experience with branding could help a company that was no longer associated with either low prices or quality.
“Tesco’s gain is Unilever’s loss,” said Jefferies analyst Martin Deboo, who said Mr Lewis has a track record of turning round businesses.