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UPDATE 5-Tesco CEO Leahy to retire early, insider takes over

Tue, 8th Jun 2010 15:04

By Mark Potter

LONDON, June 8 (Reuters) - Terry Leahy, who built Tesc
o Plc into the world's No.4 retailer, announced his surprise retirement, leaving internal successor Philip Clarke to tackle its toughest challenge -- a loss-making U.S. arm.

The British company said on Tuesday Leahy had decided to step down in March 2011 at the age of 55 after 14 years as chief executive, having led the group to dominate the retail market at home and expand abroad from China to the United States.

Leahy will be succeeded by Clarke, 50, who rose from a part-time shop-floor job in his schooldays to head of the fast-growing international businesses in Asia and Europe.

Analyst Clive Black at brokerage Shore Capital said Leahy's departure was 'Era changing, akin to the retirement of the likes of (Manchester United soccer team manager) Sir Alex Ferguson.'

The move was two or three years before most analysts had expected and some questioned why Leahy was leaving when his biggest gamble -- U.S. chain Fresh & Easy -- has yet to deliver.

'The surprise is there is still quite a lot of unfinished business,' said Seymour Pierce's Freddie George.

At 1200 GMT, Tesco shares were down 3 percent at 395.15 pence, one of the biggest falls on the benchmark FTSE-100 index and worse than the 2.1 percent decline on the STOXX Europe 600 retail index.

However, analysts also applauded the appointment of Clarke, only the sixth chief executive in Tesco's 91-year history.

The son of a Tesco store manager described by one company insider as 'a personable guy, not a publicity seeker,' Clarke is in the mould of Leahy himself -- apart from the fact he supports Liverpool, arch rivals to Leahy's soccer team Everton.

'A bit out of the blue, but had to happen sometime and it looks like a smooth succession,' said Arden Partners analyst Nick Bubb. 'The king is dead. Long live the king!'


Leahy told reporters his strategy of securing grocery market leadership in Britain and then expanding into higher-growth areas overseas, in non-food markets and more recently financial services, would not change.

'I feel my work is almost complete,' he said. 'We're coming out a difficult recession which I've steered the business through. By March 2011 we'll be into a strong recovery and that's a good time for a new team to take over.'

Leahy said he was confident U.S. chain Fresh & Easy would be a success once its western U.S. heartlands exit recession.

After his departure, Leahy said he would concentrate on private investments, not focused on retail, and declined to say whether he might take a political position if offered one.

'My interests will be around business generally, both here and abroad,' he said on a conference call.

Leahy's resignation comes at a time of change for Britain's top supermarket groups, with Andy Clarke recently taking over at the country's second-biggest chain Asda (part of Wal-Mart Stores Inc) and Dalton Philips at No.4 Wm Morrison.

Tesco, which runs over 4,300 stores across 14 countries, lost British market share to Asda, Morrison and industry number three J Sainsbury during the recession, due in part to its greater exposure to discretionary non-food goods.

It has lately fought back, helped by a doubling of rewards on its Clubcard loyalty scheme, although Britain's grocers are all struggling from a drop in food price inflation.

'In an ideal world he (Leahy) would have liked the U.S. to be profitable by now,' said one Tesco shareholder on condition of anonymity. 'But ... he's been brilliant. And we like the guy replacing him as well. We wish other companies did succession planning as well as these guys do.'

Tesco said Tim Mason, head of the U.S. business and another potential successor to Leahy, would become deputy chief executive with additional responsibilities in areas like branding and climate change.

However, the news could be a blow to Andrew Higginson, head of retail operations, and finance director Laurie McIlwee, both tipped as potential leaders.

(Additional reporting by Raji Menon, James Davey, Andy Callus and Clara Ferreira-Marques; Editing by Mike Nesbit and David Holmes) Keywords: TESCO/

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