Sir Terry Leahy to retire after steering Tesco through the storm

Britain's Most Admired Leader is calling it quits - and he'll leave an indelible mark on UK plc.

Last Updated: 06 Nov 2012

A surprise from Tesco today: CEO Sir Terry Leahy, one of Britain's best known businessmen, will retire from the supermarket chain at the end of next March, after 14 years in charge. He'll be replaced by international and IT director Philip Clarke, and the new man will have some seriously big shoes to fill - under Leahy's leadership, Tesco has become the most influential retailer in the UK (and recent results suggest it's well and truly over its early recession blip). But judging by the share price today, the market doesn't seem too worried that replacing one Scouse Tesco lifer with another will seriously rock the boat...

Sir Terry joined Tesco as a marketing exec way back in 1979, when it would have been hard to imagine its current dominance - it was lagging well behind the likes of Sainsbury's and M&S. But thanks in no small part to the success of its Clubcard scheme - Sir Terry's baby - it caught up fast. Since working his way up to the top job in 1997, Leahy’s strategy of expanding into non-food (including stuff like financial services) and other geographies has had extraordinary success. Sales have quadrupled, such that Tesco now accounts for £1 in every £7 spent in the UK, and it has a market share of over 30% in its sector. Last year, it raked in £3.4bn profits on sales of £62.5bn.

Inevitably, this level of dominance has attracted critics, who complain about its relentless geographical spread, its effect on smaller local businesses, and its treatment of suppliers - and as the CEO (albeit a very low-profile one), Sir Terry gets much of the blame for this. But it's hard to argue with his achievements in transforming Tesco's fortunes. His peers certainly think incredibly highly of him: in MT's annual poll, he's been voted Britain's Most Admired Leader for the last seven years in a row. It’s hard to imagine anyone ever breaking that little record.

So, a difficult task for new man Clarke. But with Tesco now looking overseas for growth given the saturation of the UK market, he's probably the obvious choice. His background is actually eerily similar to Leahy's - both went to school in Liverpool, both joined Tesco after going to Northern university (Leahy read management, Clarke economics) and both worked their way up to the board. Clarke has been running the international arm - which now accounts for 30% of sales - since 2004, so he knows his overseas onions. (Incidentally, US chief Tim Mason, who we always thought was the front-runner to succeed Leahy, at least before the relatively disappointing launch of Fresh n' Easy, has to make do with deputy CEO).

Tesco was the biggest faller on the FTSE this morning, down 2% - but that's a pretty small dip for an event of such significance. Clearly the market feels that Tesco's succession planning looks pretty solid (it also appointed new dedicated CEOs for the UK and Asia businesses) - including the like-for-like change at the top.

As for Sir Terry, the corporate world will be his oyster - he says he'll be concentrating on 'private investment', but at 55, he'll be deluged with job offers. He's already turned down Tony Blair's offer to run the NHS, but his talents will be in great demand both in the public and private sectors. Perhaps he'll even write a book - or maybe he'll just concentrate on providing forewords to the world's most authoritative and accessible management advice books...

In today's bulletin:

Sir Terry Leahy to retire after steering Tesco through the storm
Osborne proposes user-generated government
MT Leadership Visions: Eric Salama, CEO of Kantar Group
Ocado offers shares with your sun-blushed tomatoes
John Vincent: On Situational Leadership

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