Tesco reviewing slow-growing US operation

AP News
Posted: Dec 05, 2012 4:38 AM

LONDON (AP) — Tesco, Britain's biggest retailer, said Wednesday it is reviewing options for its slow-growing U.S. venture Fresh & Easy.

Tesco launched the venture in 2007, and now has 200 stores in California, Arizona and Nevada. But the business has not done as well as hoped. The company said it had recently received several approaches from potential buyers or partners in Fresh & Easy, whose chief executive, Tim Mason, will be leaving.

"This hardly represents Tesco's finest hour, but it is more about what it says about likely changes in management's thinking," analysts at Panmure Gordon said, welcoming the announcement as a sign that "management is prepared to take difficult decisions."

Tesco shares rose 4 percent to 339.75 pence as trading opened in London.

Like-for-like sales at Fresh & Easy, which exclude new stores and space, grew less than 2 percent in the third quarter.

Tesco Chief Executive Philip Clarke has been concentrating on the company's U.K. base, where its dominant market share has recently slipped a bit. Like-for-like sales in the home market, excluding petrol, were down 0.7 percent in the quarter.

In its annual report released in April, Tesco said it was "building real momentum in Fresh & Easy" with 12 percent like-for-like growth. As one sign of progress, Tesco said it had reduced its losses in the United States for the first time in 2012 — the year when it had once aimed to turn a profit.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," Clarke said. "Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities."