PROFILE: Incoming Tesco CEO Clarke Is Company Veteran

8th Jun 2010 16:32

By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Philip Clarke, the incoming Chief Executive of Tesco PLC (TSCO.LN), isn't just a veteran of the retail giant, he's spent his whole career at the company, starting with stacking shelves at his local Tesco store to earn pocket money while still at school. Clarke, 50, will take over as CEO when Terry Leahy, 55, leaves to pursue personal investments in March next year. Like Leahy, he is from Liverpool. After graduating in economics from Liverpool university, his career proper at the group began in 1981 when he joined the Tesco management training scheme. He subsequently rose through the ranks, becoming a store manager, a product buyer, a marketeer and then executive. He joined Tesco's board in 1998 and has since worked closely with the outgoing CEO, helping drive its rapid expansion into overseas markets. Under Leahy's 14-year tenure as CEO, Tesco has grown from being the U.K.'s second-biggest supermarket chain to being by far the biggest U.K. retailer and a top-four global retailer with stores in 14 countries today. The group's current geographic and commercial footprint is eye-watering: 472,000 staff, 94 million square feet of space, GBP2.34 billion net profit and revenue of GBP56.9 billion. Clarke has played a key part in driving that growth, having been head of Tesco's international operations in Europe and Asia and its information technology operations since 2003. Under his regional leadership, Tesco in 2008 bought 38 discount chain stores in South Korea under the Homever banner and has recently moved into India with plans to launch wholesale cash-and-carry chain Star Bazaar. The first store is expected to open towards the end of this fiscal year. "Phil Clarke is very well respected and has been a key driver behind Tesco's International expansion and success. In the past ten years, Europe and Asia sales have gone from GBP1.8 billion to GBP17 billion, with profits rising from GBP50 million to over GBP 900 million," said Royal Bank of Scotland analyst Justin Scarborough. Clarke wasn't immediately available for interview, but he's not expected to change Tesco's strategy, which is centered around entering new products, like financial services and telecoms, in the U.K., and new markets abroad. As Leahy made clear Tuesday: "The strategy is well-understood in the business. It is successful. The business is built around the world on a clear culture and (clear) values." Jefferies analyst James Grzinic said: "Philip Clarke is a Tesco lifer who has been instrumental in spear heading international growth. We expect little change in strategic direction in coming years." It is a view echoed by Charles Stanley analyst Sam Hart: "We expect his approach to be evolutionary and do not anticipate any radical departures from current strategy." The timing of Leahy's decision to retire came as a surprise to some analysts, who'd expected him to stay to try and bolster Tesco's fledgling U.S. operations. However, Clarke's appointment wasn't a surprise given his success as head of European and Asian operations. Still, Clarke, who is married with two children, faces two key challenges as head of Tesco -- slowing U.K. sales and a struggling U.S. business. Tesco, like rivals, has experienced a slowdown in sales growth in the U.K. in recent quarters as the economic downturn continues. Food inflation, which helped boost sales for supermarkets through 2009, fell on lower commodity prices and has squeezed the top line. U.K. retailers fear that spending and confidence in 2010 will remain subdued due to likely tax hikes, public spending cuts and unemployment as the country's coalition government reins in borrowing. "The sector is heading for its most difficult time in many years. Opening programmes are doubling, industry like-for-likes are currently negative and discretionary income is falling. Uncertainty about succession planning at the top is over, but it has increased further down the organization as it has on how Tesco will deal with the changing industry environment," Evolution Securities analyst Dave McCarthy said. Abroad, the company's struggling U.S. convenience store chain Fresh & Easy posted losses that widened to GBP165 million this year from GBP142 million last year. While Leahy remains bullish on its turnaround potential and says the chain's losses have peaked, the company is not expected to record any meaningful improvement this year. While Clarke has worked closely with Leahy for many years, they do have differences. While Leahy supports Everton, which is based in Liverpool, Clarke supports arch-rivals Liverpool Football Club. -By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires June 08, 2010 11:32 ET (15:32 GMT)