LONDON (AP) — Shares in Tesco PLC, the world's third largest retailer, slipped yesterday after it announced its chief executive would step down amid the company's expansion into the United States.

Terry Leahy plans to step down next March at the age of 55 after 14 years leading the company's transformation from industry follower to market leader. He will be replaced by Philip Clarke, 50, the company's current head of operations in Asia and Europe.

Leahy, who was knighted by Queen Elizabeth II in 2002, said he was leaving the group in good hands at an appropriate time.

"We're coming out of a difficult recession, which I've steered the business through," he said. "By March 2011, we'll be into a strong recovery and that's a good time for the new team to take over."

But the timing of his departure came as a surprise to the market, raising some questions over his decision to leave before the fledgling US business has fully bedded in.

Shares in Tesco, which ranks behind Wal-Mart Inc. and France's Carrefour SA, were 2.4 percent lower at 397.3 pence in midday trade on the London Stock Exchange.

Tesco reported a trading loss for the 2009 financial year in the United States, as it opened new Fresh & Easy stores, but has said it believes its losses there have peaked as sales rise. It plans to open more stores at a one-a-week pace.

"I'd anticipated he would continue for quite a bit longer and would stay until he proved the expansion into the US had been a success," said Charles Stanley retail analyst Sam Hart, noting that Clarke is not as well known in the industry.

"But he's almost a mirror image of Sir Terry and most will give him the benefit of the doubt," Hart added.

Tesco said Clarke, who joined the board 12 years ago, has broad experience within the group and was already in charge of almost 2,000 stores and nearly two-thirds of group space.

Like his successor, Leahy worked his way up the ranks at Tesco after enrolling in the company's management training program in 1979 after leaving university.

Joining the company when it was lagging behind market leaders Marks & Spencer PLC and J Sainsbury PLC, Leahy was instrumental in Tesco's surge to become market leader. Among other innovations, he was responsible for the Tesco Clubcard loyalty program, which gave shoppers discounts and the company valuable information about what they were buying and when. he also oversaw the company's long-term growth via its expansion from a grocer into the non-food business and international markets. Leahy's departure will give rise to a more extensive board shakeup: Tim Mason, the president and CEO of Fresh & Easy, will become deputy CEO of Tesco; David Potts, currently the UK retail and logistics director, will become the company's first CEO of its Asia business; Richard Brasher, currently commercial director, will assume the newly created role of CEO of the UK business.