Tesco signals global push with Philip Clarke’s promotion

Tesco has signalled that it will accelerate its global expansion plans with the appointment of its international chief Philip Clarke as its new chief executive.

Clarke, currently international and IT director, will take over from Sir Terry Leahy when he steps down in March 2011. Clarke is a Tesco lifer but “earned his stripes” heading the international operations, according to Shore Capital analyst Clive Black. He added: “We are losing one of the all time greats in Terry but we can expect a dramatic step up in Tesco’s international expansion under Clarke.”

He said Clarke’s greatest achievement was identifying the scale of the opportunity in South Korea, with the £958m acquisition of Homever in 2008, which “transformed the grocer’s presence” in the country. In the year to February 27, Tesco said South Korea is now its largest international business with sales of £4.5bn and profits of almost £300m.

One former Tesco director, who worked with Clarke, said: “In choosing Leahy’s replacement, the nominations committee would undoubtedly have wanted someone with international experience.”

International operations now account for a third of all Tesco’s sales. It is currently the third largest retailer by sales globally behind Walmart and Carrefour, although catching up fast with the latter.

Alongside the announcement that Leahy is stepping down after 14 years at the helm, the grocer has restructured its management board. Key new roles created include Richard Brasher, currently commercial director, becoming UK chief executive; Tim Mason, currently chief executive of Fresh & Easy in the US, retaining his role but taking on additional responsibilities as deputy chief executive; and David Potts, currently retail and logistics director in the UK, becoming chief executive of its Asia business.

Leahy said on Tuesday: “When I became chief executive I had a plan to be number one in the UK, and to use that as a strong platform to go into areas like non-food, services and international expansion. These ambitions are largely complete and the team will build on that strategy and take it to the next phase.”

He said Tesco is a growing business and “it was always my intention that the board structure would evolve when I left”. He added that the structure “is a move to being similar to a big consumer goods company”.

The former director said: “The UK is not big enough to keep up with the growth of the company, and Tesco always wanted to move to be run on a regional or country basis. The question is can it become the first proper international grocer, as it is not there yet as the UK is the dominant business, and it doesn’t yet have more than half its sales outside the UK.”

Tesco corporate and legal affairs director Lucy Neville-Rolfe said: “International has been a key focus of Terry’s plan and Phil [Clarke] has done a great job there, as well as

his considerable experience in the UK. Phil led the negotiations on India and completely changed the way we operate in China, which has given us a good platform for growth.”

Clarke said he has the “appetite and ambition” to take the reins and that the new management structure “recognises the growth of international”. He said he was “excited and very proud” to be taking over and added: “Terry has been a huge influence and I could not have had a better teacher.”