Tesco has stopped focusing on what it does well, says Sir Terry Leahy
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Version 0 of 1. The former chief executive of Tesco, Sir Terry Leahy, has said the troubled supermarket has drifted away from its core business and lost contact with its loyal customer base. Leahy said the company had “focused too much on what it isn’t, rather than remembering what it is”. However, he added that Tesco and its three main competitors may soon see some respite as the economy improves. “What it is is a very big brand in the centre of the market, and clearly if you’re weak in the centre you can get attacked from all sides,” he said in comments made during a conference call organised by Bank of America Merrill Lynch, reported by the Sunday Times. “But if you’re strong in the centre and doing what you do well, it’s a good place to be – you can attract customers from all parts of the market.” Leahy took over as chief executive of Tesco in 1997 and left in 2011 after a stewardship that garnered him a reputation as one of Britain’s most successful businessmen. Despite Tesco’s dominant performance during his reign, Leahy’s legacy has been criticised by his predecessor and mentor, Lord MacLaurin, who described a failed attempt to break the US market as “disastrous”. Leahy was succeed by Philip Clarke, who resigned from his position in July after failing to halt a slide in sales and profits. Last week the ratings agency Moody’s said the supermarket could see its debt downgraded to junk unless it outlines plans to cut borrowing and improve trading. In September a £263m accounting hole was discovered which resulted in the suspension of eight senior members of staff. The Serious Fraud Office has launched an investigation into the matter. Last month Tesco’s chairman, Sir Richard Broadbent, said he was stepping down, as the retailer announced a 92% slump in first-half profits. Leahy said during the conference call that the four main supermarkets – Tesco, Asda, Morrisons and Sainsbury’s – “may have seen the worst” during a period when discount supermarkets such as Aldi and Lidl have been making gains. He said the economy would now provide a “more favourable backdrop” for the supermarkets and that the discounters’ growth may slow. “You may start to see a situation where the hugely disruptive effect of poorer consumers and [discount] competitors starts to be accommodated by the main players and they start to respond to it,” he said. Philip Clarke was replaced by Dave Lewis, the head of Unilever’s personal care business. Leahy told those on the call that they “may be surprised how quickly you could see signs of improvement in [Tesco]. It’s very responsive to the right leadership and the right marketing strategy”. Leahy said the new chief executive had “emphasised the need to focus on customers” and that the company worked best when it followed trends and focused on consumer behaviour. A spokesperson for Tesco refused to comment on the remarks by the former chief executive. Leahy could not be contacted. |