Business

Wednesday, Dec 05 2012 02:56 PM

Fresh & Easy parent may leave US market

By The Bakersfield Californian

CALIFORNIAN WIRE SERVICES

LONDON -- 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.

Tesco said it is undertaking a "strategic review" of Fresh & Easy and will probably sell the stores.

"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."

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."

Fresh & Easy first jumped into the Fresno market in January 2010. It has eight stores in the central San Joaquin Valley: five in the Fresno/Clovis area and one each in Reedley, Lemoore and Delano.

Signs of the retailer's struggle were evident in the Valley.

The store at Cedar and Shields avenues in Fresno closed in January, one of 12 under-performing stores that closed at the time in Arizona, Nevada and California.

There are six Fresh & Easy Neighborhood Market stores in Kern County following the closure of one at South H Street and Planz Road. It was among a dozen underperforming locations shut down nationwide earlier this year.

In Bakersfield the chain has locations at 6601 Stine Road, 5190 Stockdale Highway, 11200 Brimhall Road and 11100 Olive Drive, Suite A. Wasco has a Fresh & Easy at 1304 Highway 46, and Delano has one at 611 Cecil Ave.

At least three Fresno stores never opened.

One store in a shopping center at First Street near Bullard Avenue looked ready to open years ago -- complete with shelves and display cases -- but never opened.

Fresh & Easy built a new building at the southeast corner of Herndon and Milburn avenues that never opened.

Another store at Ashlan Avenue near Cornelia Avenue west of Highway 99 was listed as "coming soon" on the company's website, but also never opened.

-- The Associated Press, Fresno Bee and The Californian contributed to this report.

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