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* CEO Philip Clarke to step down on Oct. 1
* To be replaced by Unilever exec Dave Lewis
* Warns H1 sales and profit "somewhat below expectations"
* Shares rise as much as 3.5 pct
* GRAPHIC on retail returns: http://link.reuters.com/byx42w (Adds graphic, investor comment, background, updates shares)
By James Davey and Martinne Geller
LONDON, July 21 (Reuters) - Tesco is to ditch chiefexecutive Philip Clarke and replace him with a turnaroundspecialist from Unilever, ending a disastrous threeyear reign as Britain's biggest retailer warned it would againmiss profit forecasts.
Just three weeks after backing Clarke at Tesco's annualshareholder meeting, Chairman Richard Broadbent said on Mondayit was now time to hand over to a new leader "with freshperspectives and a new profile."
Clarke, who has spent more than 1 billion pounds ($1.7billion) on a failed recovery plan in Tesco's main home market,will be succeeded on Oct. 1 by Dave Lewis, who is credited withrevamping a succession of businesses at consumer goods groupUnilever and is currently its global president of personal care.
A party scheduled for Tuesday to celebrate Clarke's 40-yearsat Tesco was promptly cancelled.
Analysts said the appointment of a non-retailer and thefirst outside CEO in Tesco's 95-year history could herald amajor strategy re-think at the world's third-biggest storesgroup, which could include big price cuts to win back customers.
"A material change in UK trading strategy cannot bedismissed, which is likely to have considerable implications forthe rest of the British sector," said Shore Capital's CliveBlack, who upgraded his rating on Tesco stock to hold from sell.
The darling of the retail sector during two decades ofuninterrupted earnings growth, Tesco started losing ground inthe UK in the final years of long-standing CEO Terry Leahy'stenure. Clarke issued his first profit warning in January 2012.
More recently, it has been squeezed between discounters Aldi and Lidl at one end and upmarket grocerssuch as Waitrose at the other, and hurt by the slowestgrowth in the overall UK grocery sector for over a decade.
Its attempts to respond were hampered by its exposure tolarge out-of-town stores in the UK at a time when more shoppersare buying online, and costly mistakes abroad including a failedexpansion into the United States, originally a Leahy initiative.
Clarke, who started at Tesco as a teenager stacking shelvesin a store managed by his father, fought back with awide-ranging plan including trimming prices, revamping storesand product ranges and investing in internet shopping andtechnology such as the Hudl tablet. But the firm's market shareand share price have continued to decline.
One former Tesco director said Clarke, 54, "confusedactivity with progress," took a series of "short term knee jerkdecisions" and had failed to listen to colleagues. "Phil hasnever listened, Phil is a teller," he said.
According to researchers Kantar Worldpanel, Tesco's marketshare dropped to 28.9 percent in June from 30.7 percent whenClarke took over in March 2011. During the same period, Aldigrew to 4.7 percent from 2.1 percent and Lidl to 3.6 percentfrom 2.5 percent, while Sainsbury's and Wal-Mart's Asda - Tesco's main rivals - remained largely stable.
Analysts said Lewis' 27-years at a major supplier to theretail sector could help negotiate better prices and that hisexperience with branding could help a company that was no longerassociated by many Britons with either low prices or quality.
DIFFERENT PERSPECTIVE
Tesco shares, which had been languishing near 10-year lows,rose around 3.5 percent in early trade. At 1337 GMT, they wereup 1.9 percent at 290.5 pence, topping the FTSE-100 index.
Shares in Sainsbury's and No. 4 player Morrisons were down 1.6 percent and 1.9 percent respectively.
"Tesco needed somebody fresh from outside the organisation.Looking at the company from a different perspective could behelpful," said one institutional shareholder in the retailer.
With Lewis, 49, viewed as heir apparent to Unilever CEO PaulPolman, succession at that firm is now far less clear.
"Tesco's gain is Unilever's loss," said Jefferies analystMartin Deboo, who said Lewis had a track record of turning roundbusinesses in Argentina, Indonesia and also Britain.
"He (Lewis) knows the UK grocery industry very well from thesupply side, which is an advantage. He's smart, entrepreneurialand commercial but at the same time he's unpretentious. I thinkhe'll be a good leader and a good cultural fit."
Lewis was chairman of Unilever UK and Ireland from 2007until 2010, when he became president of the Americas. He took onhis latest role as head of personal care products in 2011.
Still, analysts noted the transition from consumer goods toretail has not always been easy. Lars Olofsson, a former Nestleexecutive with no retail experience, took the top job atFrance's Carrefour in 2009, beginning what turned intoa very troubled three years that saw a spate of profit warnings.
Lewis will work alongside new Tesco finance chief AlanStewart, who quit Marks & Spencer earlier this month butmay not start at Tesco for six months due to a non-competeclause in his contract.
Tesco said trading had turned tougher than expected at thetime of its first-quarter update on June 4, and that sales andtrading profit in its fiscal first half were "somewhat belowexpectations." [ID:nL6N0OL14Y}
Shore Capital's Black estimated a 5-10 percent downgrade tohis 2014-15 earnings forecast.
Clarke, who had told reporters on June 4 "I'm not goinganywhere," will "provide support" to Lewis until January 2015,when he will get a year's salary in lieu of notice, Tesco said.
Lewis will be paid a basic salary of 1.25 million pounds,525,000 pounds in lieu of his current year cash bonus fromUnilever and awards of equivalent expected value in lieu ofdeferred share awards from Unilever.
($1 = 0.5858 British Pounds) (Additional reporting by Kate Holton and Nishant Kumar; Editingby Mark Potter)
