Tesco confirms exit from Fresh & Easy business
April 22, 2013

Tesco is officially declaring its U.S. Fresh & Easy Neighborhood Market store experiment a failure.

After months of speculation, Tesco's CEO confirmed today that the British retailer will exit the U.S. However, exactly what will happen to the company's Fresh & Easy Neighborhood Market chain remains to be seen. 

"The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today," said Tesco CEO Philip Clarke. "With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers."

The news comes as the London-based company reported its profits have fallen for the first time in 20 years and that it is taking an approximately $1.525 billion write-down in the exit.

Clarke explained that the past 12 months have been an important year for the retailer, which faced challenges and opportunities in many of its markets. One core part of the company's plans, he added, was to get its United Kingdom business back on track.

The past 12 months also included a strategic review of Fresh & Easy -- which led to the decision to part ways with the El Segundo, Calif.-based chain.

Based on the progress of that strategic review of Fresh & Easy, Clarke confirmed Tesco would be pulling up stakes in America -- adding that several third parties have expressed interest in the chain.

Fresh & Easy operates 199 stores in Arizona, California and Nevada. Tesco launched the concept in 2007 and has struggled to turn a profit. In April 2012, Clarke revealed that Fresh & Easy was not expected to break even until its 2013-2014 calendar year. At the same time, he said Tesco was pulling back from expanding the U.S. chain and shifting its focus to improving its locations in the U.K.

"Tesco's ignominious exit from the U.S. will grab all the headlines, but the truth is that even without the Fresh & Easy debacle, the supermarket would probably still have seen its profits fall for the first time in 20 years," Phil Dorrell, director of retail consultant Retail Remedy, told The Guardian. "Slowly, things are getting back on track in the U.K. The question now is can Tesco sustain its newfound momentum and increase profits in a still challenging global climate? 2013 is shaping up to be a critical year."

Tesco CFO Laurie McIlwee said there is "a lot of interest" in Fresh & Easy from third parties, with possible suitors for the whole business or groups of stores, according to the newspaper. No names of potential buyers were reported.

"What we're most interested in is those buyers that are interested in buying the complete business that we have in the U.S.," McIlwee added.

Clarke relayed that Tesco will not conclude its Fresh & Easy divestiture process for at least another three months.

Progressive Grocer