Tesco chief executive Philip Clarke vowed to stay at the helm of Britain's largest retailer after the supermarket reported its second year of falling profits.
Clarke, who took over as chief executive from Sir Terry Leahy three years ago, has come under increasing pressure as the country’s largest retailer has been squeezed between cut-price Aldi and Lidl and more upmarket Waitrose.
Asked if he still had the support of shareholders, he said: “It’s not for me to talk about that. It’s my job to run Tesco for its customers. It’s what I love. I’m not going anywhere and I am going to see this through.”
Long-standing finance director Laurie McIlwee resigned earlier this month, leaving Clarke the only executive director on the board, but today he denied that it was because he disagreed with Clarke’s strategies.
Tesco’s trading profit fell by 6% to £3.3 billion on sales up just 0.3% at £71 billion in the year to end-March. That was slightly better than the average City analyst forecast and the shares rose 14p, or 5%, to 303.3p.
Clarke also went on the offensive, promising customers there would be more price cuts “over the weeks and months to come”. But having committed £200 million to price cutting in February he refused to be drawn on how much more Tesco would spend.
He said: “That £200 million was the start. I intend to keep my flexibility and won’t be drawn on a number for further cuts because that is commercially sensitive.”
Rival Morrisons has promised £1 billion of price cuts over the next three years. Clarke acknowledged the surge in popularity of the discounters Aldi and Lidl.
He said: “They are formidable and have done a great job in the UK. They sell a very limited range at good prices. If you try and get lower than them on price they don’t let you. I’ve learned that we have got to be different.”
Tesco took a £801 million writedown largely on the value of its European stores where trading profits fell by 28%. It also had a £501 million writedown on its Chinese venture which, together with the previous year’s write-off on the failed US business, takes the writedowns over two years to more than £2 billion.
Clarke refused to blame his predecessor Leahy for this saying that he had been part of the decision making process at the time. He said: “Markets change and I don’t think we made a mistake.”
He declined to comment on analysts’ forecasts that profits will fall again this year. He said: “Competition has intensified and the transformation of the industry is accelerating. We have to deliver the most compelling offer to customers across all our channels.”
Clive Black, retail analyst with Shore Capital, is calling for a board shake-up but not Clarke’s head. He said: “With an executive board of one person, we assert that shareholders can only look to the non-executive directors as the source of responsibility for the group’s current plight.”