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Tesco in strategy shake-up as outsider replaces Clarke

The appointment of the first outsider to head Tesco in its 95-year history could herald a major strategy re-think at the world's third-largest retailer and a shake-up of the UK sector, analysts have said.

DEPARTURE: Philip Clarke had worked all the way from the shop floor stacking shelves with his father to become chief executive of Tesco. Picture: Reuters
DEPARTURE: Philip Clarke had worked all the way from the shop floor stacking shelves with his father to become chief executive of Tesco. Picture: Reuters

After Tesco issued another profit warning yesterday, a party scheduled for today to celebrate 40 years from shop floor to chief executive for Philip Clarke was cancelled as chairman Richard Broadbent said it was time for a leader "with fresh perspectives and a new profile".

Three weeks ago at the annual meeting Mr Broadbent backed Mr Clarke, who later said he was "going nowhere", but will now step down on October 1.

Already lined up in the wings was his successor, unveiled yesterday as Dave Lewis, 49, credited with revamping a succession of businesses at consumer goods group Unilever and currently its global president of personal care.

Tesco shares topped the FTSE100 leaderboard in early trade and finished ahead by almost 1.3 per cent, up 3.65p at 288.65p.

Shore Capital's Clive Black, who upgraded his rating on the stock to hold from sell, said: "A material change in UK trading strategy cannot be dismissed, which is likely to have considerable implications for the rest of the British sector."

The shares of rivals Sainburys fell 6.7p to 318p while number four player Morrison's was down 4.1p at 173.9p.

The coup came as Tesco issued another profits warning.

It said trading had turned tougher than expected at the time of its first-quarter update on June 4, and that sales and trading profit in its fiscal first half were "somewhat below expectations".

Mr Black estimated a five to 10 per cent downgrade to his 2014-15 earnings forecast.

"Tesco needed somebody fresh from outside the organisation," one institutional shareholder said. "Looking at the company from a different perspective could be helpful."

Jefferies analyst Martin Deboo said Mr Lewis had a track record of turning round businesses.

"He knows the UK grocery industry very well from the supply side, which is an advantage. He's smart, entrepreneurial and commercial but at the same time he's unpretentious.

"I think he'll be a good leader and a good cultural fit."

Mr Lewis was chairman of Unilever UK and Ireland from 2007 until 2010, when he became president of the Americas.

He took on his latest role as head of personal care products in 2011.

Less than a year after succeeding Sir Terry Leahy, Mr Clarke issued the retailer's first profit warning in January 2012, since when it has been squeezed by competition and hurt by the s­lowest growth in the overall UK grocery sector for over a decade.

Mr Clarke, who started at Tesco as a teenager stacking shelves in a store managed by his father, had fought back with a £1 billion recovery plan which included trimming prices, revamping stores and product ranges, and investing in internet shopping and technology such as the Hudl tablet. But the firm's market share and share price have continued to decline.

One former Tesco director said Mr Clarke, 54, "confused activity with progress," took a series of "short-term knee-jerk decisions" and had failed to listen to colleagues.

According to researchers Kantar Worldpanel, Tesco's market share dropped to 28.9 per cent in June from 30.7 per cent when Mr Clarke took over in March 2011.

During the same period, Aldi grew to 4.7 per cent from 2.1 per cent and Lidl to 3.6 per cent from 2.5 per cent, while Sainsbury's and Wal-Mart's Asda remained largely stable.

Analysts said Lewis's 27 years at a major supplier to the retail sector could help pricing and his experience with branding could help a company that was no longer associated by many shoppers either with low prices or with quality.

Mr Lewis will work alongside new finance chief Alan Stewart, who quit Marks & Spencer this month but may not be able to start at Tesco until January.

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