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Shares slump, Tesco boss says job safe

Wednesday, March 12 14:06:36

Tesco Chief Executive Philip Clarke does not feel investors are running out of patience with his leadership even after the market share of Britain's biggest retailer fell to a decade low, he said today.

Tesco, the world's third-largest retailer, is 22 months into a turnaround programme under Clarke, but sales are still falling at its 3,150 British stores despite spending on refits, more staff and new product ranges.

The retailer, whose slogan is "Every Little Helps", is being squeezed in its home market between hard discounters Aldi and Lidl on the one hand and more upmarket brands Waitrose (part of John Lewis) and Marks and Spencer Plc on the other.

Its market share fell to 28.7 percent - the lowest since 2004 - in the 12 weeks to March 2, from 29.6 percent in the same period a year before, data from market researcher Kantar Worldpanel showed on Tuesday.

Speaking at the annual Retail Week Live conference, Clarke, who took over as CEO in 2011 after a long career at Tesco, said he did not expect to be in the job as long as his predecessor Terry Leahy, who led the company for 13 years.

"You only have a job like this for a few years," he said. "I am not a young man, I'm 54 years of age and I've given it 40 years."

Asked if that meant investors were saying his time was running out, Clarke said: "I don't feel it at all. What I feel is a much greater obligation to the company and the stakeholders... customers, colleagues and shareholders.

"It's not a question about discounters or something else, it's about doing the right thing for our customers."

Tesco shares were down 0.4 percent at 314.3 pence by 1134 GMT, not far from a 16-month low of 313.2p set last month. The stock trades on a multiple of 11 times year-ahead forecast earnings, a 23 percent discount to UK peers, according to Reuters data.

Clarke, whose father was a Tesco store manager, joined the company as a shelf-stacker in 1974 and was then hired as a management trainee after graduating with a degree in economic history. He joined the board as supply chain director in 1998.

He declined to comment on a Sky News report that Chief Finance Officer Laurie McIlwee, who has been with Tesco since 2009, was likely to leave in the next few months amid tensions with the CEO.

"Big companies take a long time to change, we have more than 3,000 stores ... That takes time," Clarke said. "I know our business is getting better. There is a lag between it getting better and people talking about it."

Clarke said last month Tesco, which ranks third globally by sales after Walmart Stores Inc and Carrefour SA , would cut prices as he effectively abandoned a target for a UK operating margin of 5.2 percent, the highest in the industry, adding he would also speed up store revamps and investment in online and convenience channels.

At Tuesday's conference, Clarke stressed the importance of a shift to smaller stores as consumers around the world move from a big weekly shop to more frequent, smaller purchases. "People living their lives on the go want to grab and go," he said. "Bigger is no longer seen as better by today's customer."