Tesco's CEO-in-waiting to continue global expansion push

Deerfield, Ill. On Tuesday, British supermarket mogul Tesco PLC announced a successor to retiring CEO Sir Terry Leahy, and the naming of the incoming chief suggests that aggressive global expansion for the world’s third-largest retailer will continue.

According to a Wednesday report by the Wall Street Journal, when Tesco’s Europe and Asia leader Philip Clarke takes the reins from Leahy next March, Tesco will continue its global march, especially in emerging markets.

Leahy is credited with expanding Tesco’s international footprint from five countries to 13. Clarke’s role in the push was overseeing the retailer’s debuts in emerging markets such as China, Turkey and India. Also, under Clarke’s leadership, Tesco bought 36 hypermarkets in Korea in 2008 and announced plans to open wholesale outlets in India, the first of which rolls out this fiscal year, according to the WSJ report. Tesco is also supplying wholesale merchandise in India to Tata Group's Star Bazaar supermarket.

Clarke’s primary challenge now is to build larger-scale businesses in China, the United States and India.

"The potential market in those countries can give growth for decades," Christopher Hogbin, retail analyst at Sanford C. Bernstein & Co., told WSJ. "The primary focus is absolutely developing the businesses that they have, so they get scale and good returns in those markets."

With Tesco’s struggles in the United States, where its Fresh & Easy chain has been stymied by the housing crisis, movement into this country could prove a major challenge for Clarke, who will be supported by a new management structure that creates regional chief executives throughout the world. Retail and logistics director David Potts will take over as the first CEO of the Asian business and commercial director Richard Brasher will become CEO of the United Kingdom and Ireland. Tim Mason, president of Fresh & Easy in the United States, will continue to run U.S. operations and add duties as deputy CEO of Tesco.

All three were considered contenders to succeed Leahy, according to the report.

The new structure, Clarke said, "recognizes the shift to international and growth in Asia."

Tesco's international sales are expected to double in the next five years, Natalie Berg, research director at London-based consultancy Planet Retail, told WSJ. "Tesco has been the most successful foreign retailer expanding overseas because it has been much more flexible in adapting its store formats," she said.

Clarke's success will also depend on continued strong performance in the United Kingdom, where the retailer is entering the services sector with Tesco Bank and attempting to up its share in nonfood products.