Tesco chief executive to step down amid profit warning

Supermarket giant Tesco says chief executive Philip Clarke will step down in October, after the group suffered its largest quarterly sales drop in four decades. (AFP/Paul Ellis)

LONDON: Britain's biggest retailer Tesco said on Monday that chief executive Philip Clarke will step down later this year from the troubled supermarket giant, which has also issued a profits warning.

Clarke, 54, who has been at the helm for three years, will be replaced in October by outsider and Unilever director Dave Lewis, Tesco said in a statement, as the embattled group struggles with what it described as "challenging" trading conditions.

"Tesco plc announces that Dave Lewis will join the board of Tesco on 1 October, 2014 as chief executive officer in succession to Philip Clarke," the company said.

"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."

Lewis, 49, has worked at Dutch food and cosmetics firm Unilever for almost 28 years, during which he has been responsible for a number of business turnarounds, Tesco said. His current role is Global President, Personal Care.

- Competition from discounters -

Tesco faces fierce competition in Britain from German-owned discounters Aldi and Lidl, as well as from traditional supermarket rivals comprising Wal-Mart division Asda, Sainsbury's, Morrisons and Waitrose.

The group had revealed in June that it suffered its worst British sales performance for 40 years in the first quarter of its financial year.

Clarke, who has worked his way up from the shop floor to the Tesco boardroom, described the sales performance as the worst he had ever seen.

And in April, the group posted the second drop in annual profits in a row, hit by difficult trading in Europe and a costly investment plan which was aimed at turning around its domestic business in Britain.

"Current trading conditions are more challenging than we anticipated," Tesco added in a gloomy update on Monday.

"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."

The group is battling weaker sales in its main market in Britain and launched a £1.0-billion (1.26 billion euros, $1.7 billion) investment programme in April that was aimed at turning around its domestic business.

Over the past two years, meanwhile, Tesco decided to close its failed US division Fresh & Easy and to exit from Japan. The group also hopes that expansion into India and China can offset ongoing weakness in Europe.

"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," said Clarke in Monday's statement.

"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."

Tesco chairman Richard Broadbent added that it was "the appropriate moment to hand over to a new leader with fresh perspectives and a new profile".

- Tesco shares rally -

Investors welcomed news of the appointment of Dave Lewis.

Tesco shares rallied 1.12 per cent to 288.2 pence in morning deals on London's FTSE 100 benchmark index of top companies, which was down 0.44 per cent at 6,719.42 points.

"Investors will certainly be hoping that bringing an outsider in to the top role can give the company a fresh view and that Dave Lewis can turn the tide for the group," said Rebecca O'Keeffe, head of investment at online broker Interactive Investor.

Tesco is the world's third-biggest supermarket group after French rival Carrefour and with US retailer Wal-Mart in first place.