Tesco’s seamless succession planning has been lauded by the City as a success, but analysts warn that incoming chief executive Philip Clarke has a tough job ahead of him.
Analysts point to the new management structure and possible fall-out, the difficult UK market, the struggling US business and the strength of the UK competition as key factors that Clarke will have to battle.
In promoting Clarke, Tesco would have disappointed some of those in the running, thought to include Richard Brasher, Tim Mason, David Potts and Andrew Higginson. The new management structure has meant those who missed out have been given new roles but some believe it will still sting, especially as Clarke was a contemporary.
Credit Suisse analyst Andrew Kasoulis said: “The top team are Terry’s team and it’s difficult to know whether they will have loyalty to Phil. He will need to ensure it is a smooth transition and keep everyone on board.”
One former Tesco director said Clarke has not always been seen as a team player, which might affect morale on the board. A headhunter said the top team are ambitious, and the fallout could see some leave, with the possibility of Higginson first, as “he isn’t as Tesco through and through as some of the others”.
However, Kasoulis said: “They are all big jobs, which would be FTSE 100 companies in themselves, so they still have scope to grow.”
Another analyst said the second tier down, including rising stars such as fresh foods director Colin Holmes - who some thought was being groomed to take over as chief executive - could also be disappointed. However, the analyst pointed out Holmes or one of the others could take the newly created group commercial role, as yet unfilled.
The UK grocery market is entering a difficult period, according to Evolution Securities analyst
Dave McCarthy, with “industry like-for-likes as low as I can remember”. He also said the US business Fresh & Easy “has been a drain on profits for the last three years”. Both will present challenges for Clarke.
He also said that while Clarke is inheriting a strong business, all three of its big competitors are “much stronger businesses than in Terry’s early years”.
However, another former Tesco executive said the appointment of Brasher to head UK operations will give strength to the UK food team, and that rivals Asda and Morrisons both have new bosses who have less experience.