Relief that full-year results for Tesco (LSE: TSCO) weren’t quite as bad as the market expected is small consolation for shareholders. Profits have declined for two consecutive years. The shares are near 10-year lows.
There are signs investors as losing patience with CEO Philip Clarke. Both the Financial Times and Daily Telegraph have come out with names of possible successors suggested by anonymous institutional investors.
The buck stops
Mr Clarke has little wriggle-room to blame others. With the departure of finance director Laurie McIlwee, apparently after disagreements over strategy, Mr Clarke is the only executive director left standing. Other Tesco old-guard have gone under similar circumstances.
One of the first executive departures in the Clarke era was Richard Brasher, the board member responsible for the UK business, who left after disagreements in the wake of Tesco’s now-infamous 2012 profit warning. He wanted Tesco to make deeper price cuts, but Mr Clarke and Mr McIlwee preferred to maintain margins. Only recently did Tesco admit that it couldn’t sustain its 5.2% target any longer. Shareholders can only wonder what might have been if Mr Brasher had won the day.
It’s easy to criticise past decisions with hindsight, but Mr Clarke made a more serious error of judgement. He took on Mr Brasher’s role as UK CEO himself, saying there “could only be one captain on the pitch”. It looks like the dual role has proved to be too big a job for one man. Tesco has problems across the board, with declining market share in the UK compounded by write-downs in Europe and Asia: that on top of last year’s costly exit from the US. It’s tempting to infer that the one factor in common is Mr Clarke’s management.
Candidates
Both the Telegraph and FT name John Browett, CEO of fashion retailer Monsoon, and Dave Lewis, head of Unilever’s personal care business, as leading candidates to replace Mr Clarke. The Telegraph also chips in Martin Glenn, CEO of United Biscuits and Dido Harding, CEO of TalkTalk, while the FT adds former Tesco executives Tim Mason and David Potts.
I’d hope consideration might also be given to the he-was-right-all-along candidate David Brasher, who now runs South African Pick n’ Pay.
Like RSA, where Stephen Hester’s arrival has inspired confidence and a new beginning, Tesco is fundamentally a good company. It needs reinvigorated management to lead a recovery, but it’s a recovery that could well be worth buying into.
