Tesco’s Former Chairman MacLaurin Hits Out Over Leahy Legacy
Tesco Plc (TSCO)’s former Chairman Ian MacLaurin publicly criticized the legacy left by Terry Leahy and asked for his successor as chief executive officer to be given more time to turn around the U.K.’s largest grocer.
“When you judge the performance of a chief executive, you not only judge the performance of the day-to-day, but also his legacy,” MacLaurin, 76, said from the floor of the retailer’s annual general meeting in London today. “I think we’re all very sad in this hall to see the legacy Terry Leahy left.”
MacLaurin retired as chairman of Tesco in June 1997, only months after Leahy began a 14-year spell as CEO. Leahy stepped down in 2011, leaving his successor Philip Clarke to contend with a faltering domestic business and an unprofitable venture in the U.S. Tesco said in April that it planned to exit the U.S. after investing about 1 billion pounds ($1.5 billion) in building up the West Coast chain to about 200 stores.
“It’s a very sad situation, the enormous write downs, the situation in America,” MacLaurin said at the meeting.
The planned withdrawal from the U.S. Fresh & Easy chain is “well under way,” Clarke said at today’s meeting. No update on plans to offload the unit will be given today, he said.
Asked about what lessons management had learned from the U.S., Tesco Chairman Richard Broadbent said: “It may be a good idea to pilot ideas before rolling out on a large scale” and to alter the original plan if it’s not working.
Tesco said April 17 it would leave the U.S. in a process that would take at least three months. Billionaire Ron Burkle is in talks to buy Fresh & Easy and would use the stores to relaunch the Wild Oats brand, people familiar with the matter said this month.
Tesco has now come to grips with its biggest issues, Clarke said. The retailer is scaling back its domestic and international expansion and concentrating on making its existing stores more attractive after profit fell for the first time in almost two decades last year. As its domestic market share shrinks, same-store sales fell in eight of the retailer’s 10 international markets in the first quarter of this year.
Still, returning the home and international businesses won’t happen “overnight” and could take as long as two or three years, MacLaurin said, pleading with the board and “institutions that are looking at investing in this company” to be patient.
“I ask you sincerely to give Philip and the team a lot of time, they’ll do it,” MacLaurin said “What they’re doing now is very good.”
According to current chairman Broadbent “there are clearly opportunities to create value internationally,” as Tesco will benefit from “higher growth rates” and changing shopping habits in some of the markets Tesco is operating in.
Tesco will continue to open stores in the U.K., though new stores will be much smaller than in the past, Clarke said today.
Shareholders passed all resolutions put to the meeting, with 95 percent approval of the directors’ remuneration. Investors applauded when the meeting heard that senior managers, including Clarke, didn’t receive a bonus last year.
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