EL SEGUNDO, Calif. -- Ronald W. Burkle said his investment firm, Yucaipa Cos., tried its hardest to save Fresh & Easy, the struggling grocery chain that filed for bankruptcy protection last month, but ultimately couldn't overcome bad decisions made by the previous owner.
The billionaire investor who made his fortune in the supermarket business gave his take on why Fresh & Easy failed in a statement to the Los Angeles Times.
Last month, the El Segundo company filed for Chapter 11 bankruptcy for the second time in two years. Stores will be closed by mid-November, and about 3,000 people will lose their jobs, according to the report.
Burkle's Yucaipa took over more than 150 Fresh & Easy stores following the chain's 2013 bankruptcy. Yucaipa got a $120-million loan from Tesco, the British supermarket giant that had tried to win over U.S. shoppers, but ended up losing more than $2 billion on the venture.
During the 2013 bankruptcy, Tesco "decided to literally give us and the team half the company to see if we could save the jobs and their investment," Burkle wrote.
Burkle said he thought "long and hard about investing our time and reputation to turn these stores around."
"The business was in a free fall," Burkle wrote. "Turnarounds are tough, and falling knives are tougher yet."
Fresh & Easy was losing as much as $250 million a year, which was "horrifying," Burkle told the newspaper. But Tesco already had invested over $2 billion and provided nearly $200 million in seed money, he said.
"The chance would never come again to build something from an infrastructure like they had created," Burkle wrote. "In many ways, Fresh & Easy was a great opportunity to bring a new format to the market."
Yucaipa decided to back Jim Keyes, a former 7-Eleven chief executive who was brought on to turn around Fresh & Easy. His vision, analysts and employees said, was to transform Fresh & Easy into a chain of healthy convenience stores, a sort of organic minimart.
Keyes and his team invested about $1 million into every Las Vegas store to reposition them, and spent an additional $10 million in advertising in that region, Burkle said.
But the experiment didn't pay off.
"It didn't move the needle enough to justify further investment," he wrote. "It was a big disappointment."
Click here to read the complete Los Angeles Times account.
Meanwhile, Fresh & Easy LLC last week asked a Delaware bankruptcy judge for permission to finalize the $4.5-million sale of eight of its stores to CVS Pharmacy Inc., a deal that was planned before Fresh & Easy filed for Chapter 11 last week.
Fresh & Easy, which in September closed the sale of five of the properties to CVS, filed a proposed order that would authorize the bankrupt grocery chain to close the sale of the three remaining properties., according to a Law360 report.
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