Aspirational shoppers are key to growth, says Philip Clarke, as he pledges to 'nurture' British chain after weak results at home
The new boss of Tesco set out his strategy for the next decade today promising to invent more global retail brands and "nurture" the underperforming UK chain.
Philip Clarke said his "new vision" for the international supermarket group, which has a stock market value of £32bn, was not a break with the past but an iteration of that of his long-serving predecessor Sir Terry Leahy, whom he replaced in March. "Now I am chief executive there won't be any change of direction but there will be a slight change of emphasis," he said.
To that end, Clarke spelt out a seven-part strategy, adding two items to Leahy's original plan. He said this had served Tesco well "for more than a decade" but had to be adapted to changing consumer trends and the group's increasingly global footprint. With the core strategy unchanged, the main departure was his goal to create more "highly valued brands" to join existing ones such as its clothing label Florence & Fred (F&F) and its Technika consumer electronics brand, which are already sold in its stores around the world.
Clarke said shoppers did not always want to buy products emblazoned with the name of a supermarket and Tesco needed to give them new reasons to shop there. "As people develop their higher levels of disposable income, they want to treat themselves," he said. "They do not want to just buy Tesco Value shower gel. They want to have something sat in their bathroom that looks like it is a brand. So you create brands."
When Clarke's appointment was announced last year he was expected to be a carbon copy of his former boss: both hail from Liverpool and have spent their entire careers at Tesco. The two even live on the same street, in a village close to Tesco's head office in Cheshunt, north of London. But while Leahy was criticised for giving little away at its annual results last month Clarke promised a more "open" leadership style, with today's plan conveyed in a video message linked to his Twitter feed.
He will present details of the plan to 5,000 managers in 21 meetings across three continents over the next three months.
Nomura analyst Nick Coulter said: "Terry Leahy's 14 years at the helm ensured UK leadership with a strong platform for overseas growth. We think Phil Clarke's tenure will see the emergence of a global growth company." He said the plan to create more brands would boost long-term profitability – at the grocer while F&F clothing has received mixed reviews at home, like Asda's George brand, it has been successfully exported. The shares closed up 2% at 411p.
In recent years Tesco, which takes almost one pound in every seven spent on the UK high street, has lagged behind the growth of its supermarket rivals but Clarke said he saw scope for further expansion of the chain despite its problems. "It's our largest business and it needs to be looked after," he said. "It needs to be nurtured. I think the UK can continue to grow its stores at least for three years broadly at the pace we have seen for the past five years."
Clarke also said Tesco would establish internet operations in all 15 of its markets over the next decade, adding that it should become as good at selling health and beauty products, clothing and telecoms products as groceries.
He also batted away the suggestion that investors were growing impatient with the loss-making Fresh & Easy business in the United States, which was criticised by the influential investor Warren Buffett last month. "In the end we all know what matters is performance, and I have set some milestones and I think that is the right thing to do," he said, referring to his targets for the US chain to reduce its losses this year and break even by 2013.