06 Dec 12 UK’s Tesco pulls out of US venture
Tesco has declared its exit from the US by putting up its £1bn investment strategy of Fresh & Easy stores concept for sale, after continuous losses in the US business mounted to £850m over a period of five years.
Announcing the worst blow in 15 years, Britain’s biggest retailer Tesco’s chief executive Philip Clarke who announced a strategic review, will now decide upon whether to sell the business, or a stake in the chain or close down all 185 US stores early next year.
Philip Clarke said, “We have concluded that Fresh & Easy is not going to deliver acceptable shareholder returns in an appropriate timeframe in its current form. We’ve given the business a shot but it became clear we had to act fast. It’s likely but not certain that our presence in America will come to an end.”
The first casualty of the loss making Fresh & Easy chain comes in the form of US boss, Tim Mason’s exit, who is quitting Tesco after 30 years with a pay-off of at least £1.7m.
Tesco entered the US in 2007 with an intent to take on Wal-Mart, the largest retail market in the world. With an investment of £1bn, Tesco opened stores across Nevada, Arizona and southern California.
Now, these Fresh & Easy stores may be sold, closed or made into a joint venture. Tesco’s accumulative losses were attributed to slump in the US economy, fierce competition, wrong product choices and a mixed reaction to the format.
There are different reasons as to why Tesco failed in the US. Consumers were confused about what kind of store Fresh & Easy was. Quality fresh food, especially fruit and vegetables, were hard to get and shopping became cumbersome with the self-pay checkouts for groceries. This confused Americans who are so used to service.