TESCO shocked the City yesterday by announcing that boss Sir Terry Leahy would retire in March.
Sir Terry has led the chain for 14 years, overseeing its rise to become the UK’s leading supermarket group and will be replaced by international and IT director Philip Clarke.
The chief executive, who will be 55 when he retires, said he would retain a shareholding in the retailer while concentrating on “private investment”.
During his reign Tesco has expanded its services, offering insurance, broadband internet, credit cards and child trust funds.
Tesco shares dropped by almost three per cent after the announcement. Leahy was expected by many City analysts to stay in the post for at least another two years.
Leahy, who has shares, options and pension rights worth an estimated £70m in Tesco, said: “When I became chief executive I had a plan to build Tesco around its customers, to make it number one in the UK and to find new long-term growth in non-food, in services and in international expansion.
“It has taken 14 years but that strategy has become a firm reality now and so I feel my work is almost complete.”
Meanwhile Clarke, who first joined the Tesco board in 1998, currently runs the supermarket’s Asian and European operations, as well its IT division.
The 50-year-old is considered a “safe pair of hands” by analysts who are looking at the succession plan. He said he was “honoured and delighted” to succeed Leahy. The group has about 30 per cent of the grocery market, making it easily the UK’s biggest supermarket chain. In the year to the end of February, the company made a pre-tax profit of £3.2bn – ten per cent up on the previous year. Analyst at Hargreaves Lansdown Keith Bowman said: “Clarke is seen as a safe pair of hands by the City”.
PHILIP CLARKE IS THE MAN TO STEP INTO THE SHOES OF TESCO CHIEF SIR TERRY LEAHY
PHILIP Clarke has battled his way to the top of the company after shelf-stacking shifts for the supermarket as a schoolboy.
The 50-year old has spent his whole career at the company, which he joined in 1981 as a graduate trainee after studying economics at Liverpool University.
Before that he worked as a part-time helper in 1974, getting a grounding in the company at the bottom rung of the ladder. He had been a store manager, a buyer, and a marketer before taking charge of IT operations. He joined the Tesco board in 1998, a year after Sir Terry was made chief executive. In 2003 he was also put in charge of the firm’s international arm.
He pushed through a £958m deal for 38 hypermarkets in South Korea in 2008 which helped Tesco
increase its Asian profits by 18.9 per cent in the last financial year.
Leahy has put international expansion at the heart of his strategy for the retailer, with 5.1m square feet of new space being opened in the last year.
However, Clarke has maintained that the key to success overseas is to maintain a local focus – while not jumping into acquisitions too hastily. Tesco’s South Korean operation employs just a handful of Britons out of 20,000 staff.
Clarke said in 2006: "We don't go round the world planting flags. What we do is look for an opportunity to create value for shareholders and where we have some certainty about that.”
He is married with two children and lives in Hertfordshire – as does Leahy.
Clarke's CV is similar to that of Leahy, who also grew up in Liverpool and worked for Tesco as a boy. Leahy, though, did not go straight into the company after university – he started out at the Co-op after being rejected by Tesco.
Meanwhile, on a more personal note, Leahy is an Everton fan while Clarke supports Liverpool. He has been a non-executive director of leisure group Whitbread since November 2005.
His salary broke the £1m-mark in 2002 when he collected £1.14m. His total package last year was £2.7m compared to £5.2m for Leahy.