LONDON -- Fresh & Easy is one step closer to being a retail memory as British retailer Tesco PLC announced Wednesday that it has appointed an advisory firm to conduct a strategic review of its struggling U.S. convenience grocery chain.
El Segundo, Calif.-based Tesco operates approximately 200 Fresh & Easy stores in California, Arizona and Nevada and employs about 5,000 people. Since the business was launched, it has accumulated losses running into several hundred million pounds.
(Click here for previous CSP Daily News coverage of Tesco's Fresh & Easy.)
In connection with a third-quarter financial update, Tesco CEO Philip Clarke said the company is looking at a sale or partnership and that it has been approached by interested parties.
"In October, we announced that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores. It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," said Clarke.
"I have been clear since my appointment as CEO was announced that my role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully informed assessment of its longer-term potential," he said. "Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration."
He added, "We have therefore appointed Greenhill to assist with the review of options. 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 Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013."
Aldi Group, the German discount supermarket chain, could be among those interested in acquiring the business, some analysts said, according to a New York Times report.
And as reported in a Raymond James/CSP Daily News Flash, in connection with the review and probable sale of Fresh & Easy, Tesco has also announced the departure of Fresh & Easy CEO Tim Mason.
"Tim Mason, who leaves Tesco today, has played an important part in our success over a 30 year career with the company, and he leaves with my thanks and good wishes," Clarke said.
Since Fresh & Easy debuted in late 2007, convenience retailers have debated whether the small-format (10,000-to-15,000-square-foot and later smaller Fresh & Easy Express) grocery concept was a threat to the c-store channel, and what--if any--effect it would have on U.S. retailing. Some thought it was, some did not--but events may render the subject moot.
Steve Montgomery, president of consulting firm b2b Solutions LLC, Lake Forest, Ill., commented to CSP Daily News, "When asked several years ago about the impact Tesco's entry to the U.S. market would have on the c-store industry, my answer was that if they developed Tesco Express locations it could have a big impact. Why? Because they were already heavily involved in bringing a fresh offer to convenience retailing. Their stores in the U.K. were what we are still striving to accomplish here. That being said when I saw my first Fresh & Easy, I had two thoughts. The first was that this format will have little impact on the c-stores and second, I was not sure it was viable. It will be interesting to see who is interested in buying the locations and what they morph into."
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