Tesco CEO Philip Clarke today (5 December) insisted the UK retailer had given its US chain Fresh & Easy “our best shot” as he outlined plans to possibly sell the business.
Speaking after Tesco announced a review of Fresh & Easy that could lead to the retail giant quitting the US, Clarke said the company had done “all we could” on a venture first set up in 2007 under predecessor Sir Terry Leahy.
“The last 18 months, we gave the business the best shot. We minimised the costs. We reduced the losses. I don’t think there’s any more we could have done but once it became clear, we had to act fast,” Clarke said. “Sometimes you’re able to change the dial. Sometimes you’re not.”
Clarke, who took over as Tesco chief executive from Sir Terry Leahy last year, has faced pressure to exit the US, a market where the company has yet to break even.
As recently as October, Clarke said Tesco would continue with Fresh & Easy, although he said Tesco had decided to not open as many stores as it had planned.
Clarke said it would have been “the easiest thing to do” to leave the US as soon as he took the helm. “The past 18 months wer spent giving the business the best shot that it could, minimise the cost of those 18 months, step back the capital investment. I felt now able to make a more fully informed assessment,” he said.
In a statement posted online earlier this morning, Clarke blamed the impact of the “unprecedented crisis in the markets” on the states the retailer had targeted on the West Coast of the US.
Speaking to reporters, he refused to pin-point why Fresh & Easy had not succeeded as Tesco had hoped. “My task is not to re-test the theory of entry but to test whether the time is right to exit. The journey to sustainable returns is going to take too long. Once that became clear, it was right that we act and we act quickly.”
Clarke will lead the review of Fresh & Easy and Tesco has appointed advisers Greenhill to work with the retailer. He said Tesco had received a “number of approaches” to buy all or part of Fresh & Easy or to “partner” with it to “develop” the chain.
Fresh & Easy chief executive Tim Mason, who has spent 30 years at Tesco, has left the business. Clarke said it would have been “inappropriate” for Mason, who lead Tesco’s entry into the US, to be involved in the review.
“I didn’t think it was app for Tim to lead the rev. I wanted a fresh pair of eyes to lead the process,” Clarke said.
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.
Clarke outlined what he saw as the positive attributes of the Fresh & Easy business. “Fresh & Easy does have value, it’s a brand that resonates with customers, it has a portfolio of well-located and very attractive stores, it’s got a strong infrastructure, a great distribution centre and a unique production facility,” he said. However, he added: “We’ve now concluded that it’s not going to deliver acceptable shareholder returns in an appropriate time-frame in its current form.”