Tesco Chief Philip Clarke to Step Down After Profit Warning

21 Jul 2014 --- Tesco plc has announced that Dave Lewis will join the Board of Tesco on 1 October, 2014 as Chief Executive Officer in succession to Philip Clarke. Philip Clarke will continue as Chief Executive until that date when he will step down from the Board but will continue to be available to support the transition until the end of January 2015.

“Current trading conditions are more challenging than we anticipated at the time of our first quarter interim management statement on 4th June. The overall market is weaker and, combined with the increasing investments we are making to improve the customer offer and to build long term loyalty, this means that sales and trading profit in the first half of the year are somewhat below expectations,” a statement from the retailer read.

“The outlook for the full year will be influenced by the extent to which benefits from the investments we are making begin to be seen; by conditions in the overall market; and by any steps that may be taken during the remainder of the year to improve our customer offer further.”

Sir Richard Broadbent said: "Having guided Tesco through a substantial re-positioning in challenging markets, Philip Clarke agreed with the Board that this is the appropriate moment to hand over to a new leader with fresh perspectives and a new profile. We are pleased to announce today the appointment of Dave Lewis, President, Personal Care at Unilever, as our Chief Executive from 1 October, 2014. Philip Clarke will continue as Chief Executive until that date and will continue to provide support to Dave until January 2015. Philip will also remain Chairman of our joint venture with CRE in China until that date.”

“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.”

“Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development. He is already known to many people inside Tesco having worked with the business over many years in his roles at Unilever. The Board believes that with Dave’s leadership Tesco will sustain and improve its leading position in the retail market."

Analysts meanwhile are questioning whether Lewis will launch a full-blown price war against discounters such as Aldi and Lidl, which is a strategy Tesco has resisted in the past. Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said in a statement that, “the march of the discounters Aldi and Lidl continues, whilst Tesco’s prior advantage in the form of its overseas operations is not what it once was. The question now will be whether the new Chief Executive will have the courage to take early aggressive action, potentially going toe to toe with the discounters and impacting earnings, at least in the short term.”

And retail analysts have also been noting that Clarke inherited a difficult business to run from his predecessor Sir Terry Leahy, who lost focus on the UK business when the company decided to venture (unsuccessfully) into the US.

Speaking of his decision to leave, Philip Clarke said: "Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us. Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey."

On appointment, Lewis will receive a basic salary of £1.25m and standard benefits commensurate with his position. He will receive a sum of £525,000 in lieu of his current year cash bonus from Unilever. In addition, he will receive restricted Tesco plc awards of equivalent expected value in lieu of his deferred share awards from Unilever. In both cases, these would otherwise be forfeit when he joins Tesco. The restricted share awards will vest in line with his existing Unilever awards.

Philip Clarke will receive his current salary and benefits for the six month transitional period during which he will either be in post as Chief Executive or supporting the transition. Thereafter he will receive a sum equivalent to his contractual entitlement based on 12 months’ salary in lieu of notice.

Dave Lewis is a Non-Executive Director of British Sky Broadcasting Group plc. There is no other information required to be disclosed pursuant to 9.6.13R in respect of Dave Lewis. Dave joined Unilever in 1987 after completing a BA (Hons) in Business Studies at Trent business School, Nottingham. Over nearly 28 years Dave has worked in a variety of roles with Unilever, which have taken him across greater Europe, Asia and the Americas. His last three roles were Chairman for Unilever in the UK and Ireland, President for the Americas and his current role as Global President, Personal Care. During his career Dave has been responsible for a number of business turnarounds (e.g. Home and Personal Care Central and Eastern Europe, Unilever UK/Ireland), as well as leadership in areas of significant strategic priority (e.g. Laundry Latin America, Personal Care Indonesia/ S.E. Asia and Global Personal Care).