Struggling Tesco chief executive Philip Clarke received a much-needed boost yesterday as former boss Lord MacLaurin insisted shareholders should give him more time to reverse the supermarket’s fortunes.
His comments come three days before Mr Clarke is due to face hostile questions from investors at the annual general meeting and a year after Lord MacLaurin launched a scathing attack on Clarke’s predecessor, Sir Terry Leahy.
Lord MacLaurin admitted Mr Clarke was struggling now more than ever and laid the blame for the current failures squarely at Sir Terry’s feet.
He said: “I think Philip is under more pressure this year but it will take at least three years to turn Tesco around. The City is very short term and he needs some time to do it. I stand by what I said last year: the judgment of a good chief executive, and I’m not just talking about Terry, is how he leaves it for his successor. If you’re a good chief executive, you have to leave it in good shape, otherwise the incumbent has an uphill task.
“When Terry left Tesco he had left a US business that was wasting huge amounts of money and an underinvested UK business. Of course, it is going to be tough for Philip. I know from experience how long it takes to turn the business around.”
Lord MacLaurin, who was chairman of Tesco for 12 years until 1997, said last year that Sir Terry, chief executive until 2011, had “lost the plot” over his decision to invest in the US and focus heavily on international expansion at the cost of UK investment.
Earlier this month, Sir Terry made his first public comments about the current state of Tesco and said he was “very disappointed” by the Clarke era.
Last month Tesco revealed its worst trading performance for 40 years and promised to spend £200m to cut prices. It is joining a price war that has seen rivals Asda and Morrisons spend hundreds of millions of pounds. Sainsbury’s will join the throng after striking a joint venture with Netto that will see the discounter reintroduced to Britain.
Lord MacLaurin said he has no plans to attend Friday’s meeting to make his feelings known directly to Mr Clarke, meaning there are likely to be few supportive voices for the incumbent boss who has seen customers desert Tesco in droves. His no-show is at odds with the former chairman of rival Morrisons, Sir Ken Morrison, who called the supermarket’s current strategy “bullshit” at its meeting recently.
Both supermarkets have lost out the most to the rise of discounters Aldi and Lidl, but Lord MacLaurin insisted that every retailer is feeling the changes.
“You’ve got to put this into context – Tesco is a huge business and the retail business is changing enormously,” he said.
“Everyone is suffering and trying to manage themselves through this period.”
Shareholders have already been critical of Tesco, leading to the departure of finance director Laurie McIlwee. He announced his exit after being attacked for promising to stick to unrealistic high margins, rather than cutting prices to challenge the discounters.
Analysts have warned that Tesco’s turnaround attempts are too ambitious and unachievable. However, Mr Clarke is expected to tell shareholders that the company is on track for recovery.