Tesco Plc, the largest U.K. retailer, said Chief Executive Officer Terry Leahy will step down in March after 14 years in the position. Phil Clarke, the head of the company’s operations in Asia and Europe, will succeed him.
Leahy, 54, will “concentrate mainly on private investment” after retiring, he said today on a conference call, declining to elaborate on his plans.
During Leahy’s time at the helm, Tesco has increased sales more than fourfold and expanded into Asia and the U.S., where its Fresh & Easy chain is yet to make a profit. Clarke, 50, will be tasked with sustaining that growth and maintaining the company’s lead in the U.K., where its approximate 30 percent share of the market has barely changed in the last five years.
“Clarke is widely respected,” said Justin Scarborough, an analyst at RBS in London with a “buy” recommendation on the supermarket chain’s shares. “He’s been responsible for expansion and that’s where Tesco will continue to go.”
Tesco declined as much as 3.1 percent in London trading. Leahy’s departure is “a little disappointing,” Charles Allen, an analyst at Consumer Equity Research in London, said by e-mail. “Some major projects were only partly completed, especially in the U.S.,” Allen wrote.
Leahy joined Cheshunt, England-based Tesco in 1979 and held marketing positions at the retailer before becoming commercial director of fresh foods in 1986 and a member of the board in 1990. In 1997, he took over as CEO, succeeding David Malpas.
Tesco’s sales have risen from 13.3 billion pounds ($19.2 billion) when Leahy took over to 56.9 billion pounds in its last fiscal year. Under his leadership, the supermarket company entered markets including Japan, Malaysia, Thailand, Korea and the U.S., increasing the proportion of sales from outside the U.K. to almost a third from 6 percent when he took control.
“When I became CEO I had a plan,” Leahy said. “It has taken 14 years, but that strategy has become a firm reality now and so I feel my work is almost complete.”
The CEO ruled out staying on as a non-executive director and declined to comment on other board membership possibilities during a call with journalists today.
Leahy was paid 5.2 million pounds last year including base salary, allowances and performance-related bonuses, while Clarke received 2.7 million pounds, Tesco’s annual report shows.
China, South Korea
Clarke, 50, joined Tesco in 1981 and was appointed to the board in 1998 after holding retailing, commercial and marketing positions. He took charge of the company’s international operations at the end of 2003, having previously been head of its logistics and information technology departments.
During Clarke’s time overseeing the international unit, revenue climbed from about 20 percent of sales to more than 30 percent. The retailer also began opening six-story shopping malls in China and spent 958 million pounds on the acquisition of the Homever supermarket chain in South Korea, making it the second-largest grocer in the Asian nation after Shinsegae Co.
Tesco entered the U.S. in 2007 with the introduction of the Fresh & Easy chain. The unit, which had 145 stores as of Feb. 27, made a 165 million-pound loss last year.
“We’re coming out of a difficult recession which I steered the business through -- by March 2011 we’ll be into a strong recovery and that’s a good time” to step down, Leahy said on the call. “The team that has helped put the strategy in place will be the ones taking it to the next stage.”
Tesco appointed Tim Mason, 52, as deputy CEO, in addition to his role as president and chief executive of the company’s Fresh & Easy unit in the U.S. David Potts, 53, will become the first CEO of Tesco’s Asia unit, and Richard Brasher, 49, was named as the head of the U.K. and Republic of Ireland units.
“Strategy changes are unlikely, given the internal appointment,” James Monro, an analyst at Standard & Poor’s equity research, said by e-mail. Clarke’s appointment “also points to the growing importance of international focus,” he said. Monro has a “buy” recommendation.
Tesco shares were down 9.9 pence, or 2.4 percent, to 397.2 pence at 11:15 a.m. U.K. time. They have fallen 7.2 percent this year, having risen in 10 of the 13 years Leahy has been CEO.