Tesco launches strategic review of ailing US chain

Reuters, LONDON

Thu, Dec 06, 2012 - Page 15

Britain’s Tesco, the world’s No. 3 retailer, has launched a strategic review of its loss-making US chain Fresh & Easy that could lead to a sale or closure of the business.

Announcing the review alongside a third-quarter trading update that showed the continued pressure on Tesco’s home market, the group said it would report the findings of the review when it issues full-year results in April.

It said all options were under consideration for the business and it has appointed Greenhill & Co to assist in the review.

Tesco said it has had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with the firm. It added that Fresh & Easy CEO Tim Mason is leaving Tesco after 30 years with the group.

The 200-store Fresh & Easy chain, having absorbed nearly £1 billion (US$1.6 billion) in capital since its 2007 launch, remains stubbornly loss-making in the cutthroat US grocery market and Tesco CEO Phil Clarke has been under increasing pressure from investors and analysts to act.

Its third-quarter underlying sales growth eased to 1.8 percent from the second quarter’s 6.9 percent.

The problems in the US compounded a tough trading environment in Britain and central Europe, which was partially offset by the stronger performance in Asia.

Tesco yesterday reported a return to falling quarterly underlying sales in its home market, raising questions over whether its £1 billion recovery plan is struggling to gain traction.

The firm, which takes about one in every £10 spent in British shops, said sales at UK stores open for more than a year, excluding gasoline and value-added taxes, were down 0.6 percent in the 13 weeks to Nov. 24, its fiscal third quarter.

That compares with analysts’ forecast range of a decline of 0.9 percent to an increase of 0.2 percent. Sales in the fiscal second quarter rose 0.1 percent, its first rise after 18 months of decline.