Philip Clarke video interview June 2013

Philip Clarke is to step down from Tesco

As today’s news broke that Tesco CEO Philip Clarke is leaving Tesco at the end of September , to be replaced by Unilever veteran Dave Lewis, reaction from industry experts has been coming in. Here is what they had to say…

Bryan Roberts, director of retail insights, Kantar Retail:

While there is a lot of merit to Clarke’s strategies in the UK – convenience, digital and London are probably the highlights – these measures were clearly not turning into growth.

My sense would be that there were manifold little improvements being made across the business, rather than several big bets that might have been more transformative. Shareholder frustrations were mounting as Tesco continued to be pummelled by the discounters as well as being outperformed by Asda, Sainsbury’s, Waitrose and M&S, so Clarke’s departure sadly became an inevitability in 2014.

Dave Lewis is well-regarded in Unilever and will certainly bring a fresh point of view. Clearly, his lack of direct retail experience might be picked up as a shortcoming, but much will hinge on who he promotes or recruits around him. The level of churn in Cheshunt has been remarkable – hopefully this new era will be one of stability and longevity, as the last thing Tesco needs is more boardroom turbulence. 

Clive Black, Shore Capital Stockbrokers:

“Recent trading in the UK has been rock bottom, like-for-like (LFL) sales down by 5%, not seen in our long coverage of the stock. That out-turn partially reflects a particularly weak and competitive UK grocery market. However, it also has to be said that Tesco’s trading strategy has, to our minds, contributed to the woes of the company and the pain of a weak share price faced by shareholders.

“We have argued for some time that Tesco has not had a pricing file that is competitive enough in its home market, recognising that the group has been engaged in some good work on store updates and category reviews in recent times. As such it has seen a material reduction in sales densities, which is the prime factor behind today’s effective warning.”

Phil Dorrell, director of retail consultants Retail Remedy:

“Philip Clarke leaving is the right thing for Tesco. His strategy wasn’t working and, for some time, the UK’s biggest grocer has been drifting aimlessly.

“Clarke tried to boil an ocean and it was never going to work”

Phil Dorrell

“Clarke tried to boil an ocean and it was never going to work. The result of trying to change everything was that he achieved little and both customers and shareholders were let down.

“Realism is a far better ally of the grocer than idealism, and Clarke fell firmly into the latter camp.

“What can’t be denied is that Sir Terry Leahy delivered Clarke a hospital pass. Almost inevitably, the pass was fumbled and Clarke has had a pretty punishing time at the helm since.

“Those on the inside at Tesco know that the transition from Leahy to Clarke was anything but smooth, despite the perception that it was.

“When Clarke took over at Tesco there were all kinds of legacy problems. Those legacy problems are still there and it’s time to see whether Dave Lewis can solve them.”

Sir Richard Broadbent, Tesco chairman:

“Philip has done a huge amount to set a clear direction and re-position Tesco to meet the rapid changes taking place in the retail market.  He has achieved a great deal across all areas of the business in the face of considerable pressures.  The Board are deeply grateful to Philip for his contribution to Tesco, over the last four decades, as well as more recently as Chief Executive.  His has been an outstanding achievement.”

Natalie Berg, analyst at Planet Retail:

“As a branding expert, Lewis’ first task will be to define Tesco. Philip Clarke himself has admitted that the brand has baggage. It doesn’t stand for value, yet it doesn’t stand for quality, and without a clear proposition we fear that Tesco will continue to lose customers to more relevant and better-defined channels.

“As a branding expert, Lewis’ first task will be to define Tesco”

Natalie Berg, Planet Retail

“Being the first ‘outsider’ CEO in Tesco history, Lewis will quickly need to prove that having no direct retail experience isn’t necessarily an impediment to taking on the biggest job in UK retail. The board will be relying on his significant FMCG experience to help steer Tesco safely through the increasingly-fractious price skirmishes currently unsettling the industry.

“Despite Clarke’s relatively short, bumpy stint at the top, we have to remember that when he inherited the business three years ago, the focus was very much on international operations – some of which have since rightly been divested – while its core UK stores were overrun and underinvested.

“Although we feel Clarke has made significant progress on refreshing existing stores, the fundamental issue remains – shoppers are no longer making that big weekly trip to an out-of-town superstore. Unfortunately for Tesco, over half of its stores fall in the 50,000+ square foot bracket (excluding c-stores).

“A change in leadership may bring some much-needed fresh thinking to Tesco, but the structural shifts in the grocery sector cannot be reversed. Lewis will need to reposition Tesco to adapt to this new normal.”

Professor of Practice at Warwick Business School, Chris Beer:

“The news of Philip Clarke’s demise at Tesco if not completely unexpected is nevertheless a sad end to an uncomfortable reign.

 “It has been an unprecedentedly difficult period for the retailer but how much were the seeds of the failure of Clarke’s time in charge already sown when he assumed control?

“The situation looks uncomfortably like that at Manchester United where the expectations of a team already past its best were nevertheless just as high as ever. The pressure to deliver immediate success did not allow David Moyes the time to develop a plan to refresh and redirect the team in his own image.

“Time clearly ran out for Clarke as well.  There have been many initiatives and no shortage of investment but nothing has yet reaped the rewards necessary to keep Clarke in his job.”

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