Clarke exits after second profit warning in three years.
Tesco has announced that its Chief Executive Philip Clarke is leaving the company in October to be replaced by Unilever executive Dave Lewis, following a new profit warning for the U.K. retailer.
Tesco said on Monday that trading in recent weeks had been more challenging than anticipated and profit in the first half of its financial year would be below expectations. It is Tesco’s second profit warning in Clarke’s three-year tenure, but only its third in nearly two decades, the Wall Street Journal reported.
Lewis, a 27-year Unilever veteran, will join Tesco on Oct. 1. Clarke will then step down as chief executive, but remain with Tesco until January 2015, the company said.
Nick Bubb, independent retail analyst told The Guardian that Clarke inherited the business after it was “milked dry to finance the foolish escapade in the U.S.,” referring to the U.S. Fresh & Easy Neighborhood Market venture that never turned a profit.
Fresh & Easy Neighborhood Market won court approval earlier this month for its plan to exit bankruptcy by paying creditors in full, except for owner Tesco. The company is now known as Old FENM Inc. after Tesco sold most of its Fresh & Easy assets to an affiliate of billionaire Ron Burkle’s Yucaipa Cos.
“As a branding expert, Lewis’ first task will be to define Tesco,” Natalie Berg, global research director at Planet Retail, told CSD in a written statement. “Philip Clarke himself has admitted that the brand has baggage. It doesn’t stand for value, yet it doesn’t stand for quality, and without a clear proposition we fear that Tesco will continue to lose customers to more relevant and better-defined channels.
“Being the first ‘outsider’ CEO in Tesco history, Lewis will quickly need to prove that having no direct retail experience isn’t necessarily an impediment to taking on the biggest job in UK retail. The board will be relying on his significant FMCG experience to help steer Tesco safely through the increasingly-fractious price skirmishes currently unsettling the industry,” said Berg.
“Despite Clarke’s relatively short, bumpy stint at the top, we have to remember that when he inherited the business three years ago, the focus was very much on international operations—some of which have since rightly been divested—while its core UK stores were overrun and underinvested,” Berg added.
“Although we feel Clarke has made significant progress on refreshing existing stores, the fundamental issue remains—shoppers are no longer making that big weekly trip to an out-of-town superstore. Unfortunately for Tesco, over half of its stores fall in the 50,000+ square foot bracket,” she added. “A change in leadership may bring some much-needed fresh thinking to Tesco, but the structural shifts in the grocery sector cannot be reversed. Lewis will need to reposition Tesco to adapt to this new normal.”