CEO Clarke on the brink as Tesco unveils falling sales

Unknown-5The one factor that might save embattled Tesco CEO Phil Clarke (left) is that all the UK supermarket majors are suffering at the hands of German discounters Aldi and Liddle, not just Tesco.

Sainsbury, in the final year of long-serving CEO Justin King’s tenure, is also taking as beating as is the more exposed Morrisons (Morrisons is based in the north like Aldi and Lidl). Asda is suffering too but less so.

So are Tesco’s new and gruesome numbers (trading profit down seven per cent to £3.3bn with like for like sales dropping 3.3 per cent) all to be laid at Clarke’s door?

Some of them are; the company also announced a £540m impairment charge as it rejigs its business in China and Clarke’s job before he succeeded Sir Terry Leahy as CEO was international director. China now joins other international disasters including Fresh & Easy in the US (although this was outside Clarke’s remit), Eastern Europe and Turkey.

As for the UK, the question Tesco’s unsettled big shareholders are asking is: does Clarke have a convincing plan? At the moment the answer seems to be ‘No.’ Tesco is trying to turn its ‘white elephant’ hypermarkets into mini-shopping centres with cafes and restaurants and has invested in video service Blinkbox. Its Hudl cheap tablet computer has been a sales success although it’s unclear how much it contributes to the bottom line.

Its banking business has been slow to take off (we’re still waiting for current accounts) and Tesco no longer appears to have the mountain of free cash that made banking seem like such a good idea. And after the traumas of the Co-op with its Co-op Bank retailers-cum-bankers no longer look like such a sure thing.

Maybe there isn’t anything substantive Tesco can do. In some ways the Tesco and its nearest rivals have shot themselves in the foot by rushing into convenience stores and online, thereby taking business away from big supermarkets.

But if that’s the hard message for Tesco shareholders they might find it more palatable coming from an outsider who wasn’t part of the Leahy dynasty. Clarke is a fighter but it doesn’t look like he’s going to win this one.

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