Tesco Paves Way For Finance Director’s Exit
Tesco is preparing the ground for the departure of its finance director amid tensions with its chief executive as the retail giant attempts to reverse the declining fortunes of its core UK operations.
Sky News has learnt that Laurie McIlwee, who has served as Tesco’s chief financial officer since 2009, could leave the company within months.
The company is understood to have held discussions at a senior level about Mr McIlwee’s position since an investor presentation late last month at which it ditched a key profit margin target.
Mr McIlwee, who has in the past been the focus of doubts expressed by unidentified City investors, is said to have an uncomfortable working relationship with Philip Clarke, Tesco’s chief executive.
A formal search for a new finance director is not yet thought to be underway, but senior sources said on Sunday that Mr McIlwee’s exit was now “more likely than not” at some stage this year.
“The feedback [from some investors] was that the status quo is not tenable,” one insider said.
If Mr McIlwee does depart, it would represent the latest stage of a sweeping overhaul of the executive management at Tesco, which still possesses a commanding share of the British grocery market.
Its seemingly-unassailable position has, however, begun to look more vulnerable as so-called ‘hard discounters’ such as Aldi and Lidl have eaten into its market share.
Last month, Tesco told investors that it would plough £200m into lowering the price of everyday food staples, while also scaling back the volume of new store space it will open in the UK this year.
The chain reported a 2.4% fall in like-for-like sales during the important Christmas trading period, adding its name to those of Wm Morrison, Debenhams and Marks & Spencer, which also saw festive sales disappoint the City.
Some investors have questioned whether the proposed new phase of Tesco’s price-cutting campaign will go far enough to win back the custom of shoppers who have defected elsewhere.
Mr McIlwee’s departure as chief financial officer would leave Mr Clarke with a crucial post to fill as he battles to convince shareholders that his plan to revive Tesco deserves long-term backing.
An external appointment is seen by investors as the most likely route to rebuilding the group’s executive team.
The head of Tesco’s UK business was replaced shortly after Mr Clarke took over from Sir Terry Leahy in 2011.
In addition to the challenges in the UK, Tesco is navigating its way through the establishment of a new joint venture in China, into which it will fold is existing assets there.
A similar outcome is expected in Turkey, where Tesco has also struggled to make a success of its standalone business.
Mr McIlwee joined Tesco in 2000 as the finance director of its UK business, prior to which he had worked for PepsiCo, the multinational food and drink company, in a variety of roles.
Last autumn, the Financial Times quoted an unnamed top 20 shareholder in Tesco as saying that there were “worries” about Mr McIlwee.
“He is very abrasive and is not communicating very well with shareholders… If things keep going wrong for Tesco, then his position could come under threat,” they were reported to have said.
Tesco is far from the only major UK food retailer facing questions about its strategy.
Morrison’s will announce full-year results this week alongside which it is expected to announce the sale of some of its property assets following weak trading.