Fresh and Easy may close U.S. stores

December 6, 2012 12:22:21 AM PST
The British company that owns Fresh and Easy stores could be closing up shop in the United States. Loyal shoppers and employees are left to wonder if their local stores will disappear.

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 gasoline, 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 and Easy corporate management is remaining hopeful at least some of the stores will stay open, and Tesco says that's possible, if the company partners with another investor or sells portions of the business.

"A lot of people really love Fresh and Easy, they love our unique products, our prices and we look forward to continuing to serve them through out the process," said Brendan Wonnacott, Fresh and Easy.

Fresh and Easy opened its first store in Fresno two years ago. Since then, the company has closed its store at Cedar and Shields. There are now nine stores throughout the Valley including Fresno, Clovis, Lemoore, and Reedley.

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The Associated Press and ABC News contributed to this report.

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Statement by UFCW Executive Vice President Pat O'Neill Regarding Tesco's Announcement on US Venture, Fresh & Easy

WASHINGTON--(BUSINESS WIRE)--Dec 5, 2012--"Tesco's announcement today forces thousands of Fresh & Easy workers in California, Arizona, and Nevada to face a holiday season filled with uncertainty and fear if their jobs and stores will still be there in the new year. These job losses could have been avoided if Tesco had chosen to engage with community stakeholders and its customers to address the many underlying problems and warning signs of the troubled Fresh & Easy model.

"We call on Tesco and Fresh & Easy executives to include all community and labor stakeholders as the company undergoes this review process."


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