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Tesco Says Continued Disappointing Results Could Sink Fresh & Easy

July 2, 2012

Responding to shareholder concerns at its annual general meeting late last week, U.K. retailer Tesco said it would consider discontinuing its Fresh & Easy chain in the U.S. if its struggles endure, but resisted calls for an independent review of the business.

Tesco CEO Philip Clarke insisted that “Fresh & Easy is improving as a business” and could offer “an excellent stream of growth in future years.” But he acknowledged that “if we see no chance of success, we’ll do as we’ve just done in Japan.” Last August, Tesco put its Japanese business up for sale, and last month agreed to sell a 50% stake in the unit to local supermarket operator Aeon for JPY1 ($0.01), while also pledging to inject another £40 million ($63m) into the resulting joint venture.

Asked whether Tesco would allow an independent review of Fresh & Easy, whose underlying sales growth slipped to 3.6% in its most recent quarter from 12.3% three months earlier, chairman Richard Broadbent said, “We will not be doing that.”

Launched in 2007, Fresh & Easy currently operates 180 stores across California, Arizona and Nevada and offers more than 450 wines, ranging from $1.99 to $40 a bottle. But the chain reported a loss of $300 million for its last fiscal year, and shareholders have already been pressuring Tesco to abandon the U.S. venture. Undeterred, Tesco recently pledged to expand Fresh & Easy’s footprint to 230 stores by next year, and has revised its prediction that the brand would break even in early 2013, to early 2014.

 

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