Tesco Announces Departure from US Market

Tesco, the United Kingdom’s largest retailer, has announced its plan to exit the US marketplace in an attempt to recuperate after profits fell for the first time in 20 years. As a result of this exit, Fresh & Easy, the company’s US retailer, will “be treated as a discontinued operation”.Tesco

Despite reporting a $5 billion (£3.5bn) total trading profit and a 13% growth in online sales, Tesco will exit the United States due to the lack of profits at Fresh & Easy.  Operating 199 stores and employing close to 5,000 customers, Fresh& Easy has never excelled in the US due to competition like Wal-Mart and Trader Joe’s. In an official release, Tesco labels their exit from US markets as “well-advanced” and estimate that the exiting process will be completed this summer.

Tesco has also announced a plan to “Build a Better Tesco” in the UK. As Chief Executive Philip Clarke claims, “Our plan to ‘Build a Better Tesco’ is on track and I am pleased with the real progress in the UK. We have already made substantial improvements to our customers’ shopping experience, which are starting to be reflected in a better performance. We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders.”

He continues, “The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space. Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns.”

Tesco has received inquiries from buyers interested in possibly purchasing Fresh & Easy, either in part or as a complete package. Tesco has indicated that they are more willing to sell the whole business at once as this will alleviate leasing issues.

Tesco remains optimistic about their future growth stating, “As we deliver our objective of being the leading multichannel retailer, we are determined to do even better – for customers and for shareholders.”

Sources: Tesco PLC, Reuters