HEARD ON THE STREET: Tesco Contemplates Life After Leahy

8th Jun 2010 17:16

By Molly Neal A DOW JONES COLUMN Sir Terry Leahy has transformed Tesco from a U.K. supermarket to a global retail behemoth in his 14 years at the helm. So it's little wonder the market didn't welcome the unexpected news of his retirement and shares fell Tuesday. But investors shouldn't be too quick to pass judgment. A company as successful as Tesco can't operate without a strong management team behind the CEO and the raft of board announcements that accompanied the news of Mr. Leahy's retirement demonstrates clear succession planning. Mr. Leahy is quitting while he's ahead. He says his job is done at the retailer - Tesco's shares have tripled under his tenure compared to a 20% rise in the FTSE 100. His reign has seen the company enter Asia, launch an online presence, diversify into non-food, telecoms and banking, and attempt to conquer the U.S. market. That set it apart from rivals and helped establish its dominance in the U.K. market. Rivals such as Sainsbury and Wal-Mart's Asda have since followed many of Tesco's initiatives but lag far behind. But not all Mr. Leahy's ventures have been crowned a success. The company's expansion into the US market in 2007 with the launch of its Fresh & Easy stores couldn't have come at a worse time, as the global recession started to bite. The U.S. stores have yet to make a profit. Tesco's success elsewhere means it can absorb the U.S. losses and Mr. Leahy insists the investment will soon come good, but it's unlikely to be on his watch. Fixing the U.S. business will be the biggest immediate challenge facing Philip Clarke, Mr. Leahy's successor. He will also need to find growth in the saturated U.K. market. Though relatively unknown to investors, Mr. Clarke has strong credentials. Like Mr. Leahy, he first worked for Tesco as a boy, joining the company in 1974 and rising through the ranks from schoolboy shelf-stacker to store manager, buyer and marketer before joining the board in 1998. He's currently responsible for the company's European and Asian business, where sales have risen nearly tenfold in the past ten years and profit has risen from GBP50 million to more than GBP900 million. Mr. Leahy's work may not be done, but he appears to be leaving Tesco in good hands. (Molly Neal is an assistant news editor for Dow Jones Newswires in London. She can be reached at +44 20 7842 9358 or [email protected]) TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at [email protected]. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments. (END) Dow Jones Newswires June 08, 2010 12:16 ET (16:16 GMT)