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Last updated: December 5, 2012 8:32 am
Philip Clarke on Wednesday said that Tesco would initiate an strategic review of Fresh & Easy, in an effort to staunch losses from its US business.
“[The review] might lead to a sale of Fresh & Easy, or partnering the business. But it is likely that our presence in America will come to an end,” he said.
“In recent months, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the business.”
Tesco has invested £1bn in Fresh & Easy since its inception five years ago. It is expected that by February 2013 it will have incurred cumulative losses of about £850m from the US business.
The failure of Fresh & Easy to compete with the larger stores that are prevalent in the country has also resulted in the departure of Tim Mason, head of Tesco’s US division and the company’s deputy chief executive.
Mr Clarke declined to confirm that Mr Mason was pushed out of the job, but said: “We felt that it was the right time for Tim to leave.”
Mr Mason, who will leave Tesco with immediate effect, had been with the grocery chain for the past three decades.
Tesco has appointed Greenhill, the investment bank, to assist with the likely sale of Fresh & Easy.
Walmart, the world’s biggest retailer by sales, has been tipped as a potential buyer of some Fresh & Easy assets – a move that would complement its decision to open smaller stores in the US.
Tesco’s likely exit from the US is likely to please the grocer’s investors, many of whom have been calling for the company to quit the country and focus on its profitable ventures. Shares in Tesco shares rose 3 per cent to 336.2p in early London trading.
Pulling out of the US could prove expensive, however, as Tesco might have to write off all or part of its investment.
The news came as Tesco reported that UK like-for-like sales swung back into decline during the 13 weeks to November 24.
During the third quarter, Tesco’s UK sales shrank 0.6 per cent compared with the same period a year earlier after stripping out store openings, sales tax and petrol purchases.
This represents a slowdown from the second quarter, when Tesco reported its first rise in UK like-for-like sales for two years, up 0.1 per cent in the three months to the end of August.
“Our like-for-like sales declined at a faster rate in the third quarter than the second quarter, which is disappointing,” said Mr Clarke.
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