Tesco is to announce in its full-year results next week that it is to close its US-based Fresh & Easy supermarket business, according to media reports at the weekend.
The Daily Telegraph reported on Sunday that Philip Clarke, Tesco chief executive, is poised to confirm that the business will be closed and a piece-by-piece sale of its assets will be implemented, following the completion of a strategic review that commenced late last year.
Commenting on the reports, Shore Capital Stockbrokers, which tracks Tesco, said “the course of action outlined by the newspaper would not be a surprise.”
A writedown cost of £1 billion has been suggested to close the business, which Shore Capital estimates “would represent the vast bulk of the present book value of Fresh & Easy." Shore Capital estimates 2012/13 sales from the USA of £744 million [2011/12A; £628 million] and a trading loss of £126 million [2011/12A; £153 million].
The writing on the wall for the chain appeared to be on the cards last December, when Tim Mason, the Tesco executive that had led Fresh & Easy since its inception, left the company.
Shore Capital added that while the closure of the chain would be “a blow to the balance sheet and reputation of Tesco, albeit the balance sheet can handle the hit in our view, we see this exit as more of a story of the prior management rather than the present team. […] So, after giving Fresh & Easy a fair shot in our view, we believe that CEO Philip Clarke deserves credit for his decision to withdraw from the USA and subsequent focus upon making the most from a group that retains strong cash generative capabilities, a robust balance sheet and leading market positions in most of its trading territories.”
Tesco will announce its preliminary results for 2012/13 on 17 April. (9 April)
© 2013 - ESM: European Supermarket Magazine
