UPDATE: Clarke To Take Helm At Tesco As Leahy Steps Down

8th Jun 2010 09:12

(Adds CEO, analyst comment.) By Simon Zekaria and Patricia Kowsmann Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Tesco PLC (TSCO.LN), the world's fourth-biggest retailer by sales, said Tuesday that Chief Executive Terry Leahy will retire in March next year, and Philip Clarke, who currently heads the company's operations in Asia and Europe, will replace him. Under Leahy's 14 year tenure, Tesco has gone from being the U.K.'s second-biggest supermarket operator to by far the largest with over 30% market share, and a major international player with operations across central Europe and Asia. It also started a small U.S. operation in 2007 and has 125 convenience stores in California. "When I became CEO I had a plan to build Tesco around its customers, to make it number one in the U.K. and to find new long-term growth in non-food, in services and in international expansion," Leahy, 55 years old, said in a statement. "It has taken 14 years but that strategy has become a firm reality now and so I feel my work is almost complete," he said. Leahy said his departure would not signal a change in strategy, which is centered around entering new products, like financial services and telecoms, in the U.K., and new markets abroad. "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," he said. Tesco's move into the U.S. has yet to prove a success as its entrance coincided with the start of the credit crisis and ensuing economic downturn, which caused the company to slow its planned store opening program. However, Leahy said he is certain the U.S. operations will turn to profit. "The U.S. business has been a success in the eyes of consumers. I am sure it will be a commercial success," he said. Tesco, like rivals, has also experienced a slowdown in sales growth in the U.K. in recent quarters as the economic downturn continues, but the outgoing CEO said he expects the economy to have improved by the time Clarke takes over. "We are coming out of a difficult recession. By March 2011, we will come into a strong recovery," Leahy said. Leahy said following his retirement he will concentrate "mainly on private investment" and will keep a large shareholding in the U.K.-based supermarket group. "My interests will be around business generally, both here and abroad," he told reporters. He also said he will not be taking a non-executive position on the Tesco board, but declined to comment on whether he would take on such a role at another company. "It is too early to say." Clarke, 50, joined Tesco's board in 1998. Besides being responsible for the company's international businesses in Asia and Europe, he also heads the group's information technology operations. Tesco also said Tim Mason, president and CEO of its Fresh & Easy business in the U.S., will become deputy CEO. David Potts, currently retail and logistics director in the U.K., will become the first Asia CEO of the company, it added. In addition, Richard Brasher, currently commercial director, will take over the newly-created role of CEO of the U.K. business, as well as the Republic of Ireland operations. Leahy said there will be a "period of preparation" but that executive responsibilities across the group will not change until the stated date of transition. "The timing (of my departure) is right now. There is a strong leadership team who have the ambition to take (the company) forward." At 0749 GMT, Tesco shares were down 1.5% at 401 pence, valuing the company at 31.9 billion. The FTSE 100 Index was down 0.05%. Shore Capital analyst Darren Shirley said Leahy's retirement is a surprise, but also increases visibility on the future of the company. "The timing comes as a surprise. We were expecting him to go in the medium term, but it also removes the biggest question mark over Tesco," he said. "We have got visibility in the handover. It should be a pretty seamless transition." Shirley added the market would have no doubts about Clarke. "You don't build up a business the size of Tesco without a very capable team." -By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, [email protected] and Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires June 08, 2010 04:12 ET (08:12 GMT)