UPDATE: Tesco CEO To Take On UK Role As Brasher Steps Down

Tesco PLC (TSCO.LN) Thursday said Chief Executive Philip Clarke will assume responsibility for its struggling U.K. operations as well as his other duties, replacing Richard Brasher after barely a year into the job following the retailer's first profit warning in 20 years.

Several years of falling sales in the U.K. and a particularly dire Christmas period prompted the company to warn in January that it will make minimal profit in 2013 despite investing millions of pounds to improve service and lower prices to lure back customers who have deserted the U.K.'s largest supermarket chain for its nimbler rivals.

"I have decided to assume responsibility as the CEO of our U.K. business at this very important time," Mr. Clarke said. "This greater focus will allow me to oversee the improvements that are so important for customers."

"The depth of management at Tesco and the strong leadership team across the Group allow me to take a more active role in the U.K. whilst our other businesses continue to grow," he added.

Mr. Brasher, 49, a long-time executive who joined Tesco in 1986, was appointed U.K. and Republic of Ireland chief executive in March 2011 when Mr. Clarke took over from Terry Leahy.

Mr. Brasher wasn't immediately available for comment.

The U.K. makes up around two-thirds of Tesco's sales and profits, and Mr. Brasher was a key architect of Tesco's Big Price Drop, a GBP500 million price-cutting campaign launched in October 2011 to reinvigorate U.K. sales. The move prompted widescale price cuts across the grocery industry but has so far failed to reverse the decline at Tesco.

Its market share in the 12 weeks ended Feb. 19 fell to its lowest level since May 2005, dropping to 29.7% from 30.3% in the 12 weeks ended Feb. 20, 2011, according to the latest data from Kantar which monitors grocery purchasing habits in U.K. households.

The Big Price Drop investment will be augmented by several more millions spent on improving service at the stores.

Mr. Clarke has previously said its U.K. stores have focused too much on efficiency and cost-cutting, with less emphasis on customer service. To this end, the company announced last week that it will create 20,000 new jobs over the next few years to improve service in its stores.

The company has also committed to scaling back on its hypermarket formats that concentrate more on non-food lines and Mr. Clarke is likely to continue to pursue the strategy outlined in January which also aims to keep prices low and improve service, said Rahul Sharma, managing director of investment firm Neev Capital.

Planet Retail U.K. analyst David Gray said the Mr. Clarke was behind the strategy and was likely to continue to push it through the company.

"The store improvement program came from senior management levels and is unlikely to change [now that Clarke is in charge]," Still, Mr. Clarke face the task of keeping his eye on international operations, turning a profit in the U.S. by next year, selling off its operations in Japan and managing difficult eastern European markets.

Tesco isn't the only ailing grocer to foist its home market troubles on a busy chief executive. Outgoing Carrefour SA (CA.FR) Chief Executive Lars Olofsson assumed control of the retailer's ailing French business, which accounts for over 40% of sales, after firing French chief James McCann in May 2011, just over a year after he was brought in from Tesco to turn around the business.

In addition to dealing with problems at its international businesses, Carrefour has zigzagged on many policies in its home market, massively increased price promotions in France before switching tack last year to focus on everyday low prices, costing it sales and market share.

Like Tesco it is also stuck with a legacy of large-format hypermarket stores which it aimed to revamp, plans which are now on hold after disappointing results from the first converted stores.

Georges Plassat will replace Mr. Olofsson as CEO in June, the company's third boss in four years.

At 1406 GMT, Tesco shares were down 4 pence, or 1.2%, at 321 pence.

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; kathy.gordon@dowjones.com

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