UPDATE: Tesco CEO To Take On UK Role As Brasher Steps Down
March 15 2012 - 11:05AM
Dow Jones News
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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