Ironically, a party was planned for today to celebrate Mr Clarke’s 40 years at the company. It has been cancelled.
The retailer also revealed it had turned to an outsider to try to reverse its fortunes in Dave Lewis, an executive with the global household products business Unilever.
The move follows a torrid three-year stint at the helm by Mr Clarke, a Tesco “lifer” who started as a shelf stacker at a store run by his father and rose through the ranks to replace Sir Terry Leahy as chief executive.
Mr Clarke will be succeeded on 1 October by Lewis, aged 49, who will be paid a £1.25 million basic salary and a £525,000 “golden hello” .
City retail experts said the appointment of a non-retailer and the first outside boss in Tesco’s 95-year history could herald a new strategy. It breaks a tradition of long-serving insiders being given the top job.
“A material change in UK trading strategy cannot be dismissed, which is likely to have considerable implications for the rest of the British sector,” said Clive Black, a retail analyst with broker Shore Capital.
Tesco, the darling of the sector during two decades of overseas expansion and steady profits growth, started losing ground in its home market towards the end of Sir Terry’s tenure.
Mr Clarke issued his first profits warning in January 2012, followed by a string of disappointing quarterly sales falls that fuelled unease among institutional shareholders.
The group has also been squeezed between German-owned discounters Aldi and Lidl and more upmarket operators such as Waitrose and Marks & Spencer.
Attempts to regain ground were hamstrung by difficulties overseas, including a failed US drive by Sir Terry that his successor ditched at a cost of £1bn.
His strategy in the UK involved cutting prices and product ranges, hiring thousands more shop floor staff, and refurbishing hundreds of stores.
But the moves and his style triggered shareholder criticism as Tesco’s market share fell.
One former Tesco director said that Mr Clarke “confused activity with progress” and failed to heed colleagues. “Phil has never listened, Phil is a teller,” he said.
Neil Shah, analyst at Edison Investment Research, said Mr Lewis’s arrival “sends a clear signal that Tesco knows it has to get back to basics. Under Clarke’s leadership there is a sense that Tesco lost its sense of self”.
Mr Clarke, told reporters on 4 June that he was “not going anywhere”, but said yesterday: “Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility”.
Mr Clarke will leave with a year’s salary of £1.5m. His total payoff could be £9.6m with share options and other benefits.