The news of Sir Terry Leahy’s plans to leave Tesco next year has led to a flurry of plaudits for the UK retailer’s chief executive but what of the man set to replace him?
Fifty-year-old Phil Clarke joined Tesco in 1974 while he was still at school and has moved up through the business to lead the retailer’s international operations, overseeing stores from Slovakia to South Korea.
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When once he stacked shelves at Tesco, Clarke has since played a key role in the building of the retailer’s overseas business.
The oft-quoted statistic is that GBP1 in every eight spent in the UK goes through Tesco’s tills. However, during Leahy’s reign at the business and since Clarke became head of the retailer’s operations outside the UK, the company has transformed away from being a UK-centric grocer.
Clarke was appointed to lead Tesco’s fledgling overseas business in 2003. A year later, the retailer entered China, a market where the company now has 71 stores.
In 2007, Tesco moved into the US with its Fresh & Easy venture, although those stores remained under the stewardship of another company veteran Tim Mason.
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By GlobalDataIn 2008, Clarke oversaw a key deal for Tesco when it bought 36 hypermarkets in South Korea for GBP958m. South Korea is a critical overseas market for Tesco; in April, Leahy took time to point out that the country had become a “major engine of growth for the group”. Sales there are now a not insignifcant GBP4bn.
A Tesco lifer, Clarke has long been touted has a potential successor to Leahy, alongside the likes of Fresh & Easy boss Mason, and his appointment represents continuity at the retailer. “They’ve gone for a safe pair of hands. The new man is Tesco through and through,” says Hargreaves Lansdown analyst Keith Bowman.
Tesco’s shares slid after the retailer announced Leahy’s plans to step down but perhaps investor jitters were to be expected. The City broadly welcomed Clarke’s appointment with some arguing that Tesco’s decision to not look outside the company is an indication of the strength of its management team and that its business model is working.
“An external candidate was never going to be on the cards. Companies do that when the strategy, the business model needs a fresh pair of eyes – and Tesco’s business model has functioned very well for many years,” RBS retail analyst Justin Scarborough says. “It’s business as usual. The fact that Phil Clarke is the company’s sixth CEO should make people understand that Tesco is a business that evolves from within.”
Leahy’s departure and Clarke’s appointment signalled a fresh stage of evolution within the business.
Among the changes, Fresh & Easy chief Mason will become Clarke’s number two, taking a role of group deputy chief executive. While retaining his role at the head of the US venture, Mason will oversee “branding, our values and climate change” for the whole business, Tesco said.
Eyebrows were raised at the prospect of Mason holding both jobs, particularly with Tesco’s Fresh & Easy business yet to turn a profit, although the retailer did insist in April that losses were “flattening out”.
Some retail watchers, however, believe Mason’s experience in branding and marketing could help him play a key role alongside Clarke.
Meanwhile, Tesco has for the first time created a role of chief executive of its operations in Asia, with UK retail and logistics director David Potts taking the job.
Tesco’s most recent move in Asia was the formation of cash-and-carry business in India and Shore Capital analyst Darren Shirley suggests the creation of an executive role especially for the continent suggests the retailer has “ambitious plans” for the region.
Of course, it remains to be seen what fresh ideas Clarke, a man closely involved in expansion into China, in South Korea and in India, has for Tesco.
His appointment highlights the growing importance of Tesco’s international operations to the rest of the business, although he will now oversee a UK business selling mobile phones and mortgages alongside mushrooms and marmalade.
Analysts, however, are upbeat about Clarke taking the top job. As RBS’s Scarborough says: “It will prove to be a very, very seamless and smooth transition.”
