Blog: Will Fresh & Easy be next after Tesco's Japanese exit?

Dean Best | 31 August 2011

In the first significant strategic move of his tenure, Tesco CEO Philip Clarke has given the UK retailer's operations in Japan the chop.

There had been speculation that Clarke, who took the helm in March, could look to pull Tesco out of Japan, a market where the retailer was struggling.

Tesco's like-for-like sales in Japan fell by over 8% in the retailer's last financial year, which ran to 26 February. "Japan," Tesco said at the time, "remains a difficult retail environment."

The retailer said today that, after eight years in Japan, it has 129 stores in and around Tokyo and half, the company said today, are profitable.

It is not often Tesco, which has built a largely thriving overseas operation, throws in the towel. However, the market certainly welcomed the move, with Tesco's shares up by 3.48% at 15:26 BST this afternoon.

Thoughts naturally turn to the unit seen as Tesco's other main international problem - the US. From almost the day the first Fresh & Easy store opened in the US, Tesco has faced criticism and concerns over the US business have grown in recent months after its losses increased in the company's last financial year. Warren Buffett, for one, has called the venture "foolhardy".

Clarke said at the time that it was "essential" that Fresh & Easy's losses come down in the year ahead. However, he insisted he was confident that Fresh & Easy would be profitable by the end of 2012/13. Nevertheless, as just-food reported earlier this year, industry watchers are unsure whether Tesco can turn Fresh & Easy around.

After saying "sayonara" to Japan, how long will it be before Clarke says "see ya" to the US?