LONDON -- Global retailer Tesco Plc is facing a charge of about one billion pounds ($1.53 billion U.S.) to quit its ailing Fresh & Easy business in the United States, according to a report by The Telegraph. The size of the charge, which will be in the form of a writedown in the value of Tesco's assets, highlights the difficult time that Britain's biggest retailer has faced in the United States since opening in 2007, said the report.
CEO Philip Clarke is set to confirm in the company's full-year results on April 17 that Tesco will exit the United States after launching a strategic review last year; however, this will come at the cost of a writedown on the value of Tesco's investments in the country, including the wholly owned stores, leases and a major distribution center in Riverside, Calif., the report said.
Fresh & Easy Neighborhood Markets Inc. has its headquarters in El Segundo, Calif. It operates approximately 200 Fresh & Easy small-format grocery stores in California, Arizona and Nevada and employs about 5,000 people.
Clarke is reportedly working on the sale of the business, with German supermarket chain Aldi one of the potential buyers, but a closure of Fresh & Easy and then a piece-by-piece sale of the assets remains the most likely outcome, said the newspaper.
A recent CSP Daily News poll asked: "Tesco CEO Philip Clarke is reportedly in talks with Aldi and Trader Joe's to sell the Fresh & Easy U.S. small-format grocer. Who will buy the ailing chain?"
Nearly half of the respondents said they believe the chain will be sold off piecemeal. More than 20% said they believe that Aldi will pick up the chain. The rest of the respondents were divided fairly evenly among Trader Joe's, "a grocer with convenience stores," "a convenience retailer," "other" and "no one."
Tesco is the third biggest retailer in the world. Under Sir Terry Leahy, it built successful businesses in countries ranging from Ireland to the Czech Republic, South Korea and Thailand.
But Fresh & Easy will go down as one of Sir Terry's and Tesco's biggest failures, said the report. Other retailers to have suffered in the United States include J Sainsbury and Marks & Spencer.
Clarke has been under pressure to review the loss-making Fresh & Easy since taking over from Sir Terry in March 2011.
Last October, he halted new store openings and then announced two months later that Tesco would begin a strategic review because Fresh & Easy "will not deliver acceptable shareholder returns on an appropriate time frame in its current form."
Clarke said: "This has not been an easy decision but I know it's the right one."
Tesco declined to comment to the Telegraph.
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