Black, of Shore Capital, said Tesco’s next CFO would face a difficult job, having to grapple with a tough market and a tricky trading period for the UK’s top grocery retail chain.
However, he stressed that burden should not have to be shouldered solely by the person recruited to the role and ceo Philip Clarke – both should be supported by a robust executive team.
“At the moment Clarke is the only executive member of the board, noting McIlwee’s transitory status,” Black said. “The board seems to have been more of a holding company structure than an active and accountable executive operation of a broad based retailer in recent times.
“There may be merit in the non-executive directors revisiting and perhaps evolving the board structure applied by Clarke's predecessor Sir Terry Leahy?
‘Accountable executives’
“Accordingly, we see merit in Tesco having accountable executives responsible for the key markets again on its board; supporting and supported by the new cfo.”
A restructure would not only improve accountability and ease pressure on Clarke, he said. “Additionally, we believe that such a board would enhance the scope for effective succession planning, which seems to be glaringly absent at present.”
Board reconstruction would also demonstrate a sense of control to shareholders, Black added.
He said McIlwee’s intended departure was not surprising, but that Tesco’s announcement, without a successor lined up and not timed to coincide with the market opening as was often convention, was “curious”.
‘Not at ease’
“The departure of Mr McIlwee is symptomatic to our minds of a business that is not at ease with itself, united in its direction and comfortable within its own skin,” he added.
Tesco announced that McIlwee had tendered his resignation last Friday (April 4), following widespread national media speculation that it was on the cards. His successor has not yet been named.
News of McIlwee’s resignation comes just weeks before Tesco is expected to reveal its full-year results for 2013/14. The company is expected to disclose weak trading figures for its fourth financial quarter.
A comparison of 470 branded stock keeping units in Morgan Stanley’s Alphawise UK Food Retail Price Tracker revealed Tesco lagging behind Sainsbury and Asda on prices. That was the first time the research had recorded this since figures began to be collated in July 2011. The data indicated Tesco’s prices were on average 0.7% more expensive than Sainsbury’s in the three months from January to March 2014 and that Asda was widening the price gap. Having been an average of 3.3% cheaper than Tesco since July 2011 the tracker indicated prices for compared items were 7.7% cheaper at Asda than they were at Tesco in March this year.
Tesco had not responded to Black’s comments and Morgan Stanley’s figures as this article was being published.