Has Sir Terry’s poison chalice been handed on once again?
Some feel that Philip Clarke didn’t get enough of a chance to prove himself
Tuesday 22 July 2014
The parallels between Tesco and Manchester United grew even stronger yesterday as the latest chapter in the saga of Britain’s biggest supermarket unravelled.
Philip Clarke reluctantly took up the board’s decision to resign after failing to fill the enormous shoes left by his predecessor Sir Terry Leahy, much as Manchester United’s hapless former manager David Moyes couldn’t replicate the success of Sir Alex Ferguson.
And just like Moyes, Mr Clarke gained sympathy and understanding from some that his predecessor had left him holding a poison chalice laced with under-investment and fundamental flaws, while others less charitably said he was simply not up to the job.
Phil Dorrell, director at retail consultant Retail Remedy, was clear where most of the fault lay. He said: “What can’t be denied is that Sir Terry Leahy delivered Clarke a hospital pass. Almost inevitably, the pass was fumbled and Clarke has had a pretty punishing time at the helm since.”
So what was Sir Terry’s legacy? When he stepped down he was hailed as a demi-god by the industry. Tesco sales had soared to record highs, it was the third biggest global retailer and was opening new sites throughout the world.
Video: Clarke's resignation was 'inevitable'
But as time passed the legacy’s dark side seeped out. Mr Clarke was forced to issue a profit warning in his first year – the first in 20 years for Tesco – as it became apparent the UK business had been squeezed to fund overseas adventures.
Sir Terry’s “space race” to open as many big-box stores as possible also backfired after he left, leaving Mr Clarke to announce an £800m writedown on new stores that would never be built.
And finally, Sir Terry’s most toxic legacy, his US Fresh & Easy venture, finally bit the dust on Mr Clarke’s watch, costing a staggering £2bn.
His position was best summed up by another former Tesco boss, Lord MacLaurin, who said Sir Terry had “lost the plot” in his final years and urged that Mr Clarke be given more time.
However, Mr Clarke also faced problems of his own making, failing to get to grips with the rise of discounters Aldi and Lidl until it was too late, spending money on store upgrades when shoppers were desperate for lower prices, and losing the goodwill of the city by proving unable to give reliable guidance.
Jon Copestake, a retail analyst at the Economist Intelligence Unit, explained that Mr Clarke did have the structural challenges of Sir Terry’s reign to contend with, but added: “Strategically many of the decisions taken under Clarke may be commendable as long-term goals… However, there has also been a piecemeal and scattershot approach to Tesco’s strategy.”
Along with other analysts, he called for Tesco to consider a deeper and faster price war to win back customers deserting to Aldi, Lidl and Asda.
“Tesco has struggled primarily on price competition from discounters and online sellers – something which strategies such as a £1bn store facelift were never going to fix,” he said.
New boss Dave Lewis, who joins from Unilever, has his work cut out to not only shed Sir Terry’s legacy but now Mr Clarke’s too. He must start with prices. Shareholders will be hoping that if anyone knows about pushing suppliers it is Mr Lewis, who has spent his career with one of the biggest suppliers of them all.
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