Tesco boss Philip Clarke makes shock exit after profit warning

21 July 2014 -

Supermarket chief set to be replaced by Unilever boss Dave Lewis after investor dissatisfaction over slumping sales

Jermaine Haughton

UK retailers were left in shock today as Philip Clarke announced he will be standing down from the helm of Britain’s leading supermarket Tesco. His decision follows the company’s warning that sales and trading profits for the first half of the year would be lower than expected. Set to be replaced in October by Unilever executive Dave Lewis, Clarke filed his resignation just days before his long-planned celebrations of his 40-year tenure as a Tesco employee. The bombshell also arrived six weeks after he said he had no plans to leave the firm in the immediate future.

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

However, despite those warm words, recent industry data has shown that Tesco has lost around one million customer visits per week, and £25 million in sales – more than enough ill tidings to suggest that Clarke’s hand was forced by increasingly unhappy shareholders, who have been frustrated by the retail giant’s floundering efforts to beat off fierce competition from discounters Aldi and Lidl.

In a press statement, the supermarket said it ascribed last month’s largest fall in market share for at least 20 years to more challenging trading conditions, a weak market and the cost of store improvements. In all, it described the slippage as “somewhat below expectations”.

Kantar Retail analyst Bryan Roberts told the BBC: “Philip Clarke inherited a troubled business that had not seen enough investment in the UK and also featured misguided overseas expansion. Although a lot of progress has been made under Clarke, he has failed to reignite performance in a British grocery market that has undergone structural change and a huge shift in shopper behaviour.”

What can Dave Lewis do to revive Tesco?

Described in the supermarket’s statement as “responsible for a number of business turnarounds”, the man nicknamed “drastic Dave” is the current leader of Unilever’s personal-care business and is set to earn a salary of £1.25m, plus undisclosed Tesco shares and benefits from the switch. The 48-year-old has spent more than three decades at Unilever, and Tesco chairman Sir Richard Broadbent has backed Lewis to use his extensive experience working for the fast-moving consumer goods firm to “sustain and improve” Tesco's position in the retail market.

Hargreaves Lansdown Stockbrokers equity analyst Keith Bowman said: “In all, the task ahead for the new chief executive remains sizeable. The march of the discounters Aldi and Lidl continues, whilst Tesco's prior advantage in the form of its overseas operations is not what it once was. The question now will be whether the new chief executive will have the courage to take early aggressive action.”

Having joined Unilever in 1987 as a graduate trainee, Lewis moved up the ranks quickly following his influence on the UK launch of Dove soap in 1992, eventually leading operations in Latin America, Indonesia and central Europe. Tesco investors can look forward to a no-nonsense businessman, who has experience of carefully positioning and growing brands but also is willing to streamline – as shown when he cut 300 Unilever jobs in 2007.

IGD Retail Analysis has outlined six challenges that face Dave Lewis in his new role:

1. Find new ways of providing value to shoppers

2. Make shoppers love Tesco

3. Maintain Clarke’s new-look Tesco stores and spatial strategy

4. Provide shoppers with the best shopping trip in the market

5. Build upon existing digital strengths

6. Be more attuned to the needs of local shoppers

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Image of Tesco sign courtesy of JuliusKielaitis / Shutterstock