A FORMER chairman of retail giant Tesco yesterday launched an outspoken attack on the legacy of his protégé Sir Terry Leahy, the ex-chief executive.
Lord MacLaurin, who appointed Leahy to the top job on his retirement from the chair in 1997, diminished the former chief executive’s reputation by saying how “sad” shareholders were at the “legacy Terry Leahy left”.
Maclaurin, who spent a 32-year career with the group, said: “When you judge the performance of a chief executive, you not only judge the performance of the day-to-day, but also his legacy. I think we are all very sad in this hall to see the legacy Terry Leahy left.”
Addressing current chairman Sir Richard Broadbent from the audience of the firm’s annual meeting in London yesterday, he added that new chief executive, Philip Clarke would need two to three years to fix the business. He said: “This company is not going to be fixed overnight. It is a two or three-year job and I urge you to give Philip Clarke and his team time to do this.”
MacLaurin’s dramatic intervention comes as the retailer struggles to unravel a number of initiatives spearheaded by Leahy, including an ill-judged foray into the US, a too-exuberant expansion of large-format “hypermarkets” and the global supply chain, which was then hit by the horsemeat scandal.
Although Leahy’s reputation has been tarnished somewhat since his departure, he had left on a high note and is still considered to be one of the UK’s foremost business leaders. In 2010, the year that Leahy’s retirement was announced, Tesco posted a profit of £3.4bn. Leahy, along with MacLaurin, is often credited for steering Tesco to become the UK’s largest food retailer.
But the retail giant’s share of the market has been slipping, falling to its lowest level since 2005 in recent months. Although Tesco remains the market leader with a 30.5 per cent share, this was down slightly from 31 per cent at this time last year according to a recent report by Kantar World Panel.
At the end of last year, Clarke was forced to reveal Tesco was giving up its Fresh & Easy venture, an ill-timed move into the American market that has cost the supermarket an estimated £1 billion. Tesco is currently in talks with potential buyers for the 199-strong chain.
The criticism of Leahy came after it was revealed that Tesco is in talks to share floor space with Sports Direct in an effort to diversify its offering and stem its declining market share.
The sports chain – controlled by Newcastle United owner Mike Ashley – could take the mezzanine floors in three of Tesco’s UK hypermarkets and is looking at other opportunities. The concept has already been pioneered at a Tesco store in the Czech Republic.
The move would allow Sports Direct to benefit from customer traffic to Tesco, which would be able to shed space to a non-competing retailer.
Tesco has already acquired restaurant chain Giraffe and coffee business Harris + Hoole with a view to using them in larger stores. Tesco is also expected to sign a deal to establish tyre-fitting shops on its sites through a partnership with Scotland-based Blackcircles.
Last month, the firm revealed it has taken a £804m write down on the value of its property, largely due to the “space race” between UK supermarkets to build hypermarkets.