Philip Clarke will be replaced as Tesco CEO

The immediate jump in Tesco’s share price after the axe fell on Philip Clarke this morning seemed almost cruel.

Looking back at Clarke’s tenure, there are no big disaster projects to point a finger at – nothing in the league of Morrisons’ Kiddicare acquisition or Carrefour’s disastrous launch of Planet stores. Rather it is just a case of slowly deteriorating financial results.

In many ways, Clarke kept plugging away with the same strategy of his predecessor Terry Leahy but the formula just stopped working.

Clarke was a solid, unspectacular leader at a time when the grocery industry was heading into a period of unprecedented structural change – he was a safe pair of hands when the company needed a visionary leader to reimagine its raison d’être

The consensus is that new CEO David Lewis needs to try something new. Tesco is stuck in the middle with no distinct offer and it is not quite clear who the natural Tesco customer is or why someone should choose Tesco ahead of its many cheaper or more upmarket rivals.

Analysts at Bernstein had some interesting thoughts on the way forward today. Tesco pioneered good, better and best product ranges, so why not do the same for stores…  Bernstein called for the creation of value stores, finest service stores, and midmarket stores in an investor note.

“Each retail format would have radically different store operating model, different prices and service proposition, competing for different baskets,’ they wrote. “The back-end would be shared and provide cost efficiencies.”

The approach has its merits. It would allow Tesco to tailor its offer to what customers really want in each location rather than trying to be all things to all men.

While Tesco remains the biggest player in UK grocery, it is not quite clear who the natural Tesco customer is anymore. Tesco became the supermarket you went to because it was there.

Much has been written today of David Lewis’ lack of retail experience, but perhaps employing a man who’s natural constituency is brand differentiation and loyalty makes perfect sense for the particular challenge Tesco faces.

In this sense, getting rid of Clarke could be one of the shrewdest pieces of brand marketing the company has at its disposal. Clarke’s departure puts a figurative full stop to its era of decline, the new man allows Tesco to seemingly start afresh even if its core strategy remains relatively unchanged.

The profit warning also helps this image of renewal. A number of analysts have talked of an imminent ‘kitchen sinking’ exercise at the supermarket and it will be no surprise if Tesco takes further measures – perhaps a change of accounting procedures or even write downs on its vast property holdings – to further suppress the base from which Lewis’ performance will be judged.

Market gravity dictates that Tesco will rebound from its catastrophic sales drops – the comparatives are now becoming so weak that it would be more a surprise if Lewis doesn’t lead something of a recovery than if he does.

Tesco will continue to face the same old problems - notably pressure from discounters, tightening margins and falling sales in core supermarkets. But at least they have now changed the narrative and headlines around its decline. That might not directly improve sales, but it buys them more time. Even if Clarke’s execution had been stayed today, time was something he was fast running out of.