Grim outlook for Tesco boss Philip Clarke ahead of expected profits fall

Tesco chief executive Philip Clarke expected to announce 6% fall in annual profits
Tesco chief executive Philip Clarke expected to announce 6% fall in annual profits

Tesco is expected to announce another year of declining sales and a 6% year-on-year shrinking of profit to £3.24bn, placing more pressure on embattled chief executive Philip Clarke and fuelling speculation of an investor-led succession plan.

The supermarket group is set to disclose on Wednesday a 6% drop in global trading profits, its second consecutive fall after a 13% plummet the previous year.

Meanwhile, according to a report in The Daily Telegraph, analysts at Barclays have forecast that the last quarter saw sales drop 2.6% on a like-for-like basis.

Critics of Tesco have listed various reasons for its falling margins, including its insufficient response to competition from German discount retailers Aldi and Lidl at the lower end of the market, and Waitrose at the upper end.

Meanwhile, according to reports, Tesco shareholders have been discussing potential successors to Clarke, including former Dixons chief executive – and current Monsoon Accessorize chief – John Browett, as well as Unilever president of personal care Dave Lewis.

Tesco has been subject of late to headline-grabbing upheaval in its upper echelons. Earlier this month, the retailer’s finance director Laurie McIlwee walked out, while Sky News reported that plans were afoot to replace chief marketing officer Matt Atkinson, although a leaked memo penned by Clarke sought to quash rumours.

Clarke has been far from inactive during his tenure as CEO, after taking over from predecessor Sir Terry Leahy in 2011, but his strategy has so far left the City largely unimpressed and performance lacklustre – highlighted in 2012 by its first profit warning in more than 20 years.

In February this year, Clarke outlined various measures the business was taking to revive the brand, including a store refurbishment programme, £400m in price cuts, the digitalisation of its Clubcard loyalty scheme and moves to become a "multichannel retailer".

But the plans have so far not led to the desired revival. According to research published last week by Kantar Worldpanel, Tesco’s market share fell to 28.6% in the 12 weeks to 30 March, down from 29.7% a year ago.

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