Sir Terry Leahy, the visionary who transformed Tesco

Sir Terry Leahy leaves behind him a powerful legacy, but Tesco is losing a once-in-a-generation retailer and businessman, say commentators.

Leahy surprised the industry with the announcement on Tuesday that he will leave next year, as it had been expected he would stay on until 2014 to reap the benefits of his full pension and remuneration packages.

Leahy, 55, joined Tesco in 1979 and held several marketing and commercial positions before becoming chief executive in 1997. Since 1997 the business has transformed from a UK grocery operation into a global business, stretching into areas such as non-food, clothing, online shopping and banking.

Former Tesco clothing chief executive John Hoerner said: “When Terry took over, Tesco was a second- or third-rate business, and now look at it - he has totally transformed it.”

Arcadia owner Sir Philip Green told Retail Week: “You don’t get to be the third biggest retailer in the world by being lucky. He’s built a world-class business.”

Shore Capital analyst Clive Black said Leahy stepping down is “akin to the retirement of the likes of Sir Alex Ferguson from football”, while Credit Suisse analyst Andrew Kasoulis said “there is only Sir Ken Morrison in retail who is of Terry’s ilk”.

One former Tesco director, who worked with Leahy, said: “He is an exceptional leader and the competition will be able to sleep a bit better knowing he’s leaving, no matter who replaces him.”

Leahy’s legacy is wide ranging and, according to grocery research house IGD, since 1997 the retailer has increased group turnover by 310% to £56.9bn, UK stores from 568 to 2,482 and stores outside the UK from 190 to 2,329.

The biggest influence Leahy made on Tesco’s culture was his constant focus on the customer. Tesco corporate and legal affairs director Lucy Neville-Rolfe said: “Terry led on customer strategies, and developing that relationship with the customer has been transformational. Applying that strategy to non-food, to clothing, to services, and online has also been a key part of his vision.”

Other key strategies that commentators highlight include the launch of Clubcard while he was marketing director and the subsequent use of the data to shape the direction of the business, bringing hypermarkets to the UK, forging the international platform and the relentless improvement culture in the business for everything to be run cheaper and more simply.

Leahy has also created a talented top team. Green said: “Over the 14 years Terry has been chief executive he has had a strategy, built a team of executives he trusts, all of them highly regarded, and that’s enabled them to appoint a successor from within without a fuss.”

Leahy said his vision is “largely complete” but analysts point to the US venture Fresh & Easy as one of the parts that he has not seen through to a success. Collins Stewart analyst Greg Lawless said: “The jury’s still out on the US and Leahy leaving early is possibly a sign he doesn’t think the remuneration will be too tempting in another two years.”

Leahy said he had had “a good innings” and that “it’s important to know the right time to go”.

Despite rumours that Leahy would take a government role after leaving Tesco, he said he plans to spend time with his “private investments” and that he has “no plans to go into politics”.