Tesco to exit US venture Fresh & Easy
15 Apr 2013
Tesco is expected to report slowing growth in sales since Christmas despite £1 billion in investment aimed at improving its fortunes in the UK after a shock profits warning a year ago.
Tesco boss Philip Clarke will announce future plans for the supermarket on Wednesday that could also include a confirmation of a planned exit from the US, after revealing the first profit drop in 20 years.
The supermarket, has so far had nothing to show by way of improved prospects after slashing prices and taking on more store staff to offset the impact of the horsemeat scandal. Fierce competition from discount stores such as Aldis as also ongoing difficulties with Tesco's non-food ranges have only added to its problems.
Even as Tesco tried to improve service and reassure shoppers in the wake of the horsemeat scandal, it continued to experience difficult trading conditions overseas.
The retailer last year put the future of its California-based Fresh & Easy chain under review. There have also been reports that rivals including Aldi have shown an interest in taking on stores, though no announcement of a deal is expected this week.
Meanwhile, Clarke, who succeeded Sir Terry Leahy as Tesco CEO in 2010, would confirm this week that he intended to unwind his predecessor's most ambitious projects by quitting the loss-making Fresh & Easy business in America.
According to analysts, he would also announce a push to refocus UK investment from setting up supermarkets to turning its existing stores into family destinations with coffee shops as also building an online business to take on Amazon.
Issues including the restriction on opening hours in South Korea – Tesco's biggest international business as also the costs of pulling out of the US would see Tesco report profit fall of around 10 per cent.
Analysts expect a fall in underlying pre-tax profits from £3.92 billion to £3.5 billion and in addition Tesco faced a £1 billion write down from the cost of pulling out of the US where Fresh & Easy never made a profit.
According to analysts, Clarke would confirm that Tesco planned to exit the US, but he would not likely provide detail about whether Fresh & Easy would be closed or sold.
