Tesco chief executive Philip Clarke is stepping down after a profit warning and will be replaced by Unilever personal care global president Dave Lewis. Retail Week takes a look at what the analysts say.
“The evidence from Carrefour is that making the transition from a major FMCG player to retail is a difficult one for an executive. There, Lars Olofsson, who joined from Nestle in 2009, oversaw five profit warnings in just over a year, and swiftly departed.
“Of course Tesco now is a very different business to Carrefour then, but it is an interesting case study. Do FMGC suppliers focus too much on the bigger picture and sometimes struggle with the fact that ‘retail is detail’? We will see.
“On the plus side, Mr Lewis CV is exemplary and he was regarded as a rising star within Unilever, as well as being known to many of the senior executives at Tesco.
“He will need to arrive with a change mentality. It is clear that one of the reasons that Philip Clarke failed to turn the Tesco ship around was that he preferred to fine tune the engine. A more root and branch approach is required.
“It may be that this takes a while for Lewis to implement, and longer still for it to bear fruit, but this is what is required to nurse the patient back to full health.”
Jonathan Pritchard, Oriel
“We give credit to the Tesco board for making a decisive and tough decision in bringing in a new chief executive.
“The current strategy has been failing (evidenced by falling market share) and investor confidence in management had fallen, indicating potential management changes, particularly as consensus forecasts were looking increasingly wrong in the face of poor sales performances.
“The choice of Dave Lewis may appear surprising. He has had a successful career at Unilever and is highly respected, but he is not a retailer.
“Tesco has stated that a “fresh perspective” and new approach is needed and hence why they have chosen someone without any retail baggage and someone who can start work in 10 weeks.
“We would expect the new CEO to ‘kitchen sink’ full-year numbers and hence we have major uncertainty on Tesco strategy, profits and management’s ability to adapt to retailing from branded manufacturing.”
Dave McCarthy, HSBC
“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.
“Being the first outsider chief executive 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 over-run 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.
“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.”
Natalie Berg, Planet Retail
“We await Dave Lewis’ prognosis for the business, particularly the UK, with considerable interest. We believe that his appointment will be greeted with a great sense of encouragement by a store staff that has been pummelled in recent years so leading to a collapse in morale.
“A material change in UK trading strategy cannot be dismissed, which is likely to have considerable implications for the rest of the British sector.
“Will Lewis keep Clubcard, Fuel Save, Price Promise and all of the other initiatives through which Tesco seeks to extol its value credentials to such poor recent effect?
“With this important development we sense that the market will broadly welcome the change in management, which is a melancholy point to make given the hard and extended graft that Philip Clarke has put into Tesco.
“However, sadly, we feel that there has been a feeling of inevitability about developments at Tesco in recent times, and as such with this news we would expect the market to offset the disappointment of the downgrades with a sense of relief that the group is entering a potentially more effective chapter in its development.
“Hence, in expectation that the bull will be grabbed by the horns, even with more potential restructuring, we upgrade our recommendation on Tesco from sell to hold and for the sake of the group’s shareholders wish Lewis well.”
Clive Black, Shore Capital
“The new chief executive Dave Lewis was highly regarded at Unilever and clearly a loss for them.
“Clearly the talent is there, but will the lack of retail experience be a problem to set a new strategy for a retailer that is having an existential crisis?
“We prefer giving the benefit of the doubt and look forward to first statements.
“The failing strategy: Tesco became successful by ‘being everything to everybody’ and being the fastest at putting down space. That was fine as long as Tesco had limited local competition.
“Now Tesco faces distinct and targeted local competitors in most of its neighborhoods. If you want cheap food, there is a better alternative next door (Asda, Aldi, Lidl), if you want great quality the same applies (Sainsbury’s, M&S, Waitrose).
“Tesco responded by trying to be a ‘bit better at everything’ but that doesn’t change the local trade-off consumers face.
Bruno Montenye, Bernstein
“We’ve always thought that Phil Clarke was a street-fighter, and his inheritance from the once highly regarded Terry Leahy was very poor (with the core UK business milked dry to finance the foolish escapade in the US) but he was always going to find it hard to survive another profit warning.
“We don’t know Dave Lewis, but he is well regarded and has been touted as a possible chief executive replacement at Tesco for some time.
“The hitherto ineffective chairman Richard Broadbent calls him “a new leader with fresh perspectives and a new profile.
“Dave Lewis knows nothing about retailing, but maybe that doesn’t matter, because as a leading supplier he certainly knows how to win price wars and perhaps that is the big issue now facing Tesco in the UK.”
Nick Bubb, independent analyst and Zeus Capital consultant
“What can’t be denied is that Sir Terry Leahy delivered Phil Clarke a hospital pass. 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.”
Phil Dorrell, Retail Remedy
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