Clarke, who will be replaced by Dave Lewis, head of Unilever personal care, announced the decision today (July 21), after Tesco revealed another profit warning. Britain’s biggest retailer said trading conditions had proved “more challenging” than expected at the beginning of June.
The weaker market combined with its investment programme meant sales and trading profit in the first half of the year were “somewhat below expectations”, said the retailer.
The full-year outlook will depend how soon investments to improve its offer to customers and build loyalty pay off, it added.
Clarke said in a statement: “Having taken the business through the huge challenges of the last few years, I think this is the right moment to hand over responsibility and I am delighted that Dave Lewis has agreed to join us.
‘Right moment to hand over responsibility’
“Dave has worked with Tesco directly or indirectly over many years and is well-known within the business. I will do everything in my power to support him in taking the company forward through the next stage of its journey.”
Clarke’s surprise announcement follows a series of pledges to stick with the retailer, as its sales came under the twin pressures from premium retailers, such as Waitrose, and the discounters Aldi and Lidl.
After Tesco posted operating profit down by 6% to £3.3bn in full year results to February 22, Clarke told BBC Radio 4’s Today programme in April: “I intend to be here to see this through.
“We are in the middle of key changes and I will lead my team through to make it better for customers.”
‘I will lead my team through ...’
In June he repeated his commitment to stay at the helm of Tesco, after the retailer reported its third quarter of falling sales. Like-for-like sales – including VAT and excluding petrol – fell by 3.7% for the three months to May 24.
Previously Clarke said he planned to retire from the business at 60. He is currently 54 and has led the business for since 2011.
The retailer has lost up to 1M customer visits a week, representing sales valued at £25M, according to recent industry research.
Tesco shares rose by nearly 2% in early trading.
Lewis will receive a basic salary of £1.25M plus benefits. He will also receive £525,000 in lieu of his current year cash bonus from Unilever. “Thereafter he will receive a sum equivalent to his contractual entitlement based on 12 month's salary in lieu of notice,” said the retailer. Lewis is the first outsider to be appointed to lead the retailer.
Meanwhile, grocery sales in May and June were “the worst ever” seen in 40 years, according to Tim Eales, strategic director at IRI.