EL SEGUNDO, Calif. -- London-based retail giant Tesco PLC needs to reassess its strategy at Fresh & Easy Neighborhood Market Inc., its loss-making U.S. business, a group that works with U.S. union-sponsored pension funds said, according to Dow Jones report.
The Change to Win Investment Group (CtW), which works with the pension plans of four major U.S. unions, said Thursday it has contacted shareholders who control 75% Tesco's shares, urging them to vote for amendments in the retailer's annual report designed to increase transparency on Fresh & Easy's future strategy.
"Given the increasing skepticism among investors about the viability of Fresh & Easy, we believe the time is now for greater disclosure regarding performance and a transparent decision-making process on the future of the U.S. business," CtW said in a statement obtained by the news agency.
CtW added that Tesco should set up a committee of nonexecutive directors to review the future performance of its U.S. business, with an emphasis on providing "greater visibility" for investors.
"This is an unusual action, but Change to Win believe it's needed to demonstrate to the board the increasing shareholder discontent about Fresh & Easy," the group said.
Fresh & Easy was launched in 2007 on the U.S. West Coast, but the chain has yet to turn a profit as the financial crisis has weighed on American consumers. In April, Tesco CEO Philip Clarke said he wants to see "a bit more" from the U.S. business and noted that it won't break even in the current financial year, despite previously saying it would.
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In the 13 weeks to May 26, sales from Fresh & Easy stores open more than a year increased 3.6%, a big slowdown from the previous quarter. Fresh & Easy generates just 0.89% of Tesco's total revenue, said the report.
Tesco played down the significance of the claims by CtW and said it remains committed to its U.S. business.
"Fresh & Easy continues to grow and innovate and is showing positive sales momentum," a Tesco spokesperson told Dow Jones. "We are confident the business is moving in the right direction. This proposal is union motivated and follows several years of union opposition in the U.S. CtW is not a shareholder, and does not speak for shareholders."
El Segundo, Calif.-based Fresh & Easy operates about 150 stores in California, Arizona and Nevada. In addition to fresh prepared meals, meats and produce, it offers national brand products and household items. The chain's fresh&easy brand products have no artificial colors or flavors, no added trans fats, no high-fructose corn syrup and only use preservatives when absolutely necessary.
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