U.K. retail giant Tesco hopes to sell its 200-store U.S. Fresh & Easy grocery chain intact, but said on Wednesday (June 5) that it "continues on track" to pull out of the U.S. no matter how the stores are sold, according to Supermarket News.
And that's all Tesco said on the subject in its financial release for the quarter that ended in May, except to add, "We will update the market as appropriate."
Leaving the U.S. has already meant a $1.5 billion write-down, and considering that's more than half a year's net profit for Tesco, it might seem like this should be a bigger deal.
Actually, the eventual deal is probably going to be plenty big, since the Fresh & Easy stores were largely placed in locales where consumers would be interested in a more upscale grocery line. And given how quickly Belgian retailer Delhaize was able to sell off three of its more conventional U.S. grocery chains last month—a matter of days before they were snapped up by Albertsons owner Cerberus Capital Management—there's a good chance that Tesco will be able to sell Fresh & Easy as an operating business, so it won't have to deal with layoffs and ending leases.
Tesco's bigger worries are with the stores it isn't unloading. Remember those Ikea meatballs containing horse meat? Horse DNA was also found in four products in Tesco stores, which the chain's management blames for a 1 percent drop in U.K. same-store sales. On the non-food side, Tesco is now making major adjustments to its general-merchandise assortment—fewer TVs, more dinner plates, clothes and stationery, according to CEO Philip Clarke.
And Tesco has already spent as much ($1.5 billion) trying to spruce up its U.K. stores as it has written off on Fresh & Easy. True, that's 3,141 U.K. stores compared with 200 U.S. stores. But eventually Tesco will get some cash from the Fresh & Easy sale, while there's been no perceptible improvement in the U.K. investment. Maybe Tesco isn't saying much about Fresh & Easy because it just doesn't have any complaints.
Tesco Managers To Get No Bonuses Unless Profit Plunge Is Reversed
Tesco Hit With Claims Its Price Comparisons Are Bogus
Tesco Confirms Its U.S. Pullout, Fate Of Fresh & Easy Unclear