London Briefing: every little helps to reshape history at Tesco
Until now Terry Leahy had appeared happy to maintain a dignified silence on Tesco’s travails
Terry Leahy: stepped down as chief executive of Tesco three years ago after a glorious 14-year reign
Terry Leahy stepped down as chief executive of Tesco three years ago, after a glorious 14-year reign in which profits soared from £750 million to £3.2 billion and its stock market value more than tripled from £10 billion to £35 billion.
In his time at the top, Leahy was repeatedly voted Britain’s most admired businessman, and the company he ran was widely regarded as the nation’s most successful business.
All of the above is true and it’s certainly the version of history that the former supermarkets boss prefers. But it’s not the full story: Leahy also took Tesco into the US, launching its disastrous Fresh & Easy venture in 2007.
Six years later, Tesco made a humiliating exit from its ambitious American dream at a cost of more than £1 billion, having never made a penny in profit over there. The cost in management time, as they took their eye of the ball in the core UK business, is incalculable.
Leahy also led the wild “space race” that supermarkets embarked on as they built up huge landbanks for store expansion. In his time at the top, the number of Tesco store in the UK spiralled from less than 600 to almost 2,500.
Dignified silenceSo it was a heavily edited version of history that Leahy presented on Monday on the BBC’s Panorama special, Trouble at Tesco.
Until now, Leahy had appeared happy to maintain a dignified silence on the supermarket group’s travails. With his version of history rapidly unravelling, Leahy broke his silence to lay the blame for the group’s current problems squarely at the feet of his own successor, Phil Clarke. He told Panorama: “People tried very hard to do the right thing; it clearly has not worked. In the end, that’s a failure of leadership, not a failure of the business.
“For whatever reason my successor went in a different direction and I think it may or may not have been with the right reasons or intentions but it clearly didn’t work.”
Customers’ trust in the company had been eroded in Clarke’s brief time at the top, Leahy claimed, saying that the company’s culture had changed “not for the better”.
It was an astonishing attack – particularly as Leahy was Clarke’s mentor for many years. Clarke did not appear on the programme but he traded blows with his former boss in a statement. While acknowledging Tesco’s “unprecedented” success in the past, he said it was “plainly the case” when he took over in 2011 it faced a number of critical challenges that had been building for some time.
Knives outThe spectacle of two former bosses of one of Britain’s leading employers sticking the knives into each other was a deeply undignified one. It won’t have done much for staff morale and it’s certainly something that Tesco’s current chief, Dave Lewis, could have done without.
The publicity over the Panorama programme overshadowed a rare piece of good news for the embattled business, as analysts at Morgan Stanley signalled their approval of the new boss’s turnaround plan, raising its rating on the group from “equal weight” to “overweight.” They also raised the target price for the shares from 155p to 260p.
That turnaround plan includes the closure of 43 stores, many of which will doubtless have been opened during the Leahy years. Morgan Stanley is also excited about the potential disposal of some of Tesco’s international operations; again, a business was built up in Leahy’s reign.
Clarke is not blameless. He should have pulled out of the US straight away and moved on prices much more rapidly. His reign at Tesco has been described as one of “fear and machismo” but then that’s a pretty good description of the Leahy years too.
The best thing now the former Tesco chiefs could do for the company is to stay silent and allow the new boss to get on with engineering the recovery of the broken business they bequeathed to him. Fiona Walsh is business editor of theguardian.com