The unassuming empire-builder

When Sir Terry Leahy steps down at Tesco, he leaves a company that is now the world's third biggest retailer
Click to follow
The Independent Online

Several years ago, Sir Terry Leahy was asked if Tesco wasinterested in bidding for the up-for-sale stores of Carrefour, the French retail giant. While he would not comment on the speculation, he added with a wry smile: "But we like shops."

In many ways his answer epitomised the man, who steps downs next week after a 32 years at the grocer, the last 14 as chief executive: quietly spoken, modest, understated and occasionally showing his cheeky Liverpudlian sense of humour.

But it also hinted at his relentless – some say ruthless – drive to expand Tesco globally.

And like shops he certainly did, as Sir Terry hands over an empire of 5,237 stores in 14 countries, including the UK, to Phil Clarke, Tesco's international chief, from 1 March. But its store count is just one part of his legacy at Tesco, which grew pre-tax profits by 10.1 per cent to £3.4bn for the year to the end of February 2010, on sales of £62.54bn.

He also leaves behind a business that sells everything from toys to garden sheds and plans are even reportedly afoot to sell second-hand cars online later this year. It also has a sprawling retail services arm that touches everything from credit cards, telecoms and pet insurance.

Clive Black, an analyst at Shore Capital, said: "If we had been talking in the early 1990s about Tesco doubling the size of its UK grocery business, becoming the UK's biggest non-food retailer, on the threshold of launching a full-scale banking and insurance business in the UK, having a leading, or No 2, market position in seven countries and acorns planted in America, China and India, I would have probably said you needed to check into Alcoholics Anonymous."

Malcolm Walker, the chief executive of Iceland, the frozen-food retailer, said: "He has done an unbelievable job but in a very quiet and unassuming way. They have stormed ahead. When we [Iceland] started out in the 1970s, it [Tesco] was still a corner shop and a bit downmarket." He jokes: "Ask him if he wants to be a non-executive at Iceland."

Tesco overtook Sainsbury's to be the UK's biggest grocer in 1995. But Tesco's scale – it now has a 30.5 per cent share of the UK grocery market, nearly double second-placed Asda's 16.9 per cent – has meant it has increasingly faced opposition from pressure groups (Tescopoly was founded in 2005), the competition authorities and trade bodies, such as the Association of Convenience stores.

Some rival grocery retailers have also voiced fears privately over the UK population sleepwalking into living in "Tesco Land". The subject of the vilification of Tesco clearly irritated Sir Terry and perhaps baffled him, often prompting a response that it is judged by its 20 million UK _shoppers a week.

An avid supporter of Everton football club, Sir Terry's mantra of follow the customer has delivered spectacular results, which has benefited shareholders, including many of its 472,000 staff globally.

When Sir Terry took the helm in 1997, Tesco had a market capitalisation of £4bn, but today it is £32.46bn. It is the only FTSE 100 company that has delivered 26 years of consecutive dividend growth.

On the shopfloor, Tesco has become the yardstick for other retailers, based on the goals Sir Terry set out in 1997: to be as big in non-food as in food; and to develop a profitable retailing services business and to be as strong internationally as domestically. Sir Philip Green, the tycoon behind the retail empire that spans Topshop to Bhs, said: "It is a very well-spread business that will stand the test of time. Tesco is not a supermarket, it is a brand."

Whether it is Tesco's own-label strategy, multiple store formats or slick online grocery and non-food operations, Tesco has often shown its rivals a clean pair of heels despite not always being the first to market.

Under his leadership, Tesco has also extended Clubcard – its loyalty card and powerful data insight tool into customer shopping habits, launched in 1995 – into six countries outside Britain. His attention to detail is legendary in the industry. Sir Philip said: "This is a world-class business built by someone who understands every element of the business."

A Tesco insider says he is also a man of ideas. "He is very cerebral and a big thinker. He is a massive driving force behind the success of that business and involved at a level of detail that you would not expect from someone in a multinational of that scale."

A former colleague describes his "relentless drive for Tesco to be bigger and better. It was not about what you had achieved it was about what you could achieve tomorrow. There was always more you could do."

In fact, not everything that Sir Terry has touched has turned to gold. Tesco launched operations in France in the early 1990s and Taiwan in 2000, but soon exited these countries after realising it could not achieve it stated aim of being the market leader or No 2 in each territory it operates.

The group launched its Fresh & Easy chain in November 2007 in Las Vegas, Arizona and California, but it made a loss of £165m in 2009-10. This was partly down to a severe economic downturn in those regions and Sir Terry has vowed it will break even by 2013. But aside from these blips, he has led Tesco to become the world's third-biggest retailer since its first permanent overseas foray into Hungary in 1995.

Perhaps one of his biggest achievements has been to build a much envied executive team and wider workforce.

As Mr Walker says: "When you talk to suppliers about their dealings with other supermarkets they can be quite critical of the calibre of people at some of them. But they are all very complimentary about the high standard and efficiency of people at Tesco."

As for the next move, Sir Terry, who turns 55 on Monday, has only said he will focus on "private investment" and will not take a big job at another company.

Certainly, Sir Terry, who grew up on a Liverpool council estate, will not be short of cash, given that he was paid £5.2m last year and has an estimated pension of £15m.

Whatever he does next, his 32 years at Tesco will be remembered for a long time. As Mr Black says: "He should be written up as a world-leading retail strategist and businessman."

The to-do list for Phil Clarke, the new boss at Tesco

Improve sales of UK business

Phil Clarke, who becomes Tesco's chief executive on 1 March, inherits a UK business which continues to grow total sales strongly, largely driven by its rapid store -opening programme. But he will be keen to see Tesco improve its UK underlying sales growth, which has recently lagged behind rival Sainsbury's.

Hang on to high flyers

Tesco has lost a number of executives recently. Laura Wade-Gery, its UK head of non-food, defected to Marks & Spencer this month. He will need to be vigilant of executives , particularly those who missed out on the top job.

Fix Fresh & Easy in the US

Arguably, Mr Clarke's biggest challenge is to turn around the performance of its Fresh & Easy chain in the US, which racked up losses of £165m in 2009-10. Tesco has said Fresh & Easy will break even by 2013, but he has big decisions to make about the speed of its opening programme and size of stores.

Learn how to silence Tesco's critics

A Tesco lifer, Mr Clarke wants Tesco to be more admired for the work it does globally by customers, governments and shareholders. Building bridges with stakeholders, such as the City, the media, US unions and the press will help.

Comments