UK/US: Tesco "to announce review of US business"

By Dean Best | 4 December 2012

Tesco is reportedly set to announce a strategic review of its US business, which could lead the UK's largest retailer to quit the market after five years.

Sky News reported this evening Tesco will reveal plans to look at the future of its Fresh & Easy chain in the US alongside its scheduled third-quarter sales update tomorrow.

Tesco could not be reached for immediate comment. A spokesperson for Fresh & Easy refused to comment when contacted by just-food.

The retailer opened its first Fresh & Easy store in California in 2007 but the venture has yet to break even.

The performance of the business has attracted criticism from some investors and analysts. US billionaire investor Warren Buffett once described the venture as "foolhardy".

However, Tesco CEO Philip Clarke, who became chief executive last year, has kept the retailer's presence in the US even as he quit Japan, another market it had found challenging, although he has publicly insisted Fresh & Easy's financial results must improve.

Speaking at the World Retail Congress in London in September, Clarke insisted Fresh & Easy was "fighting nicely" in the US and he was upbeat about its prospects.

"The stores we have continue to grow nicely. The reason it's worth persisting with is the stores fulfil a particular need for a particular group of customers. It's only five years old. It's playing in a playground with some very big and some very old retailers that are very wise and it's fighting nicely," he said.

Clarke said recent changes at Fresh & Easy were paying off, with the stores enjoying sales growth ahead of the US market.

"We'll continue to hopefully see those sales grow and move towards profitability," he said. "Already the changes we have been making have gone some way to prove that there is life in Fresh & Easy yet."

In October, Tesco reported a 5.2% increase in half-year like-for-like sales in the US, excluding fuel. The trading loss from Fresh & Easy stood at GBP74m, 1.4% lower than a year before.

Tesco said it would cut spending on new capital investment in the US and focus on improving the profitability of its existing stores. The retailer said it would have 200 stores by the end of its financial year, rather than the 230 it had at the start of the year.

Sectors: Mergers & acquisitions, Retail

Companies: Tesco, Fresh & Easy

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