Tesco PLC (LON:TSCO), a retailer in the United Kingdom ended the tenure of its chief executive officer, Philip Clarke as the company suffers a series of profit declines. The company announced the appointment of Dave Lewis, an executive from Unilever plc (ADR) (NYSE:UL) (LON:ULVR) as its new CEO effective October 1, 2014.
Reason behind Tesco’s struggles
Clarke is a 40-year veteran at Tesco PLC (LON:TSCO). According to analysts, the British retailer struggled since he became CEO in 2011 due to his too much devotion to the policies of his predecessor, Terry Leahy even if the situation of the retail industry already changed.
Bruno Monteyne, a senior analyst at Bernstein Research, commented, “Philip Clarke stuck way too long to this tried and successful formula of the previous decade which they should have abandoned… They should have been more radical in moving on.”
Monteyne added that the time for the strategy of Clarke’s predecessor had been over, and the “new management team did not change anything, just tried a little bit harder doing exactly what they did before.”
According to Tesco PLC (LON:TSCO), Clarke will remain available to support the transition until the end of January 2015.
Clarke agreed it’s time to transfer leadership
In a statement, Tesco Chairman Richard Broadbent said, Clarke agreed with the board of the company that this is the right moment to transfer his leadership to a new executive with a new profile and fresh perspectives.
“Philip has done a huge amount to set a clear direction and re-position Tesco to meet the rapid changes taking place in the retail market. He has achieved a great deal across all areas of the business in the face of considerable pressures,” said Broadbent.
On the other hand, Clarke said, “Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility, and I am delighted that Dave Lewis has agreed to join us. Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey.”
Details of Lewis’ appointment as CEO
Tesco PLC (LON:TSCO) said Lewis will receive a basic salary £1.25 million and standard benefits proportionate with his position as CEO of the company. He will receive a total of £525,000 to compensate for his current year cash bonus from Unilever plc (ADR) (NYSE:UL) (LON:ULVR).
Lewis will also receive restricted Tesco PLC (LON:TSCO) stock awards of equivalently expected value of his deferred shared awards from Unilever plc (ADR) (NYSE:UL) (LON:ULVR). The restricted awards will vest in line with his existing Unilever awards.
According to Broadbent, the board of Tesco PLC (LON:TSCO) believes that Lewis will bring a wealth of international consumers experience and expertise in management change, business strategy, brand management and customer development.
Broadbent said, “The board believes that with Dave’s leadership, Tesco will sustain and improve its leading position in the retail market.”