Advertisement

Tesco mulling sale of Fresh & Easy

Supermarket titan Tesco has announced that it is considering a sale of its loss-making US division, Fresh & Easy, as it revealed that the frontman of the unit, Tim Mason, will leave the company after 30 years' service.

Supermarket titan Tesco has announced that it is considering a sale of its loss-making US division, Fresh & Easy, as it revealed that the frontman of the unit, Tim Mason, will leave the company after 30 years' service.

To accompany the group's third-quarter trading statement, in which it revealed a decline in like-for-like (LFL) sales in the domestic UK market, Tesco Chief Executive Officer Philip Clarke said that he would be conducting a strategic review of Fresh & Easy.

Advertisement - Article continues below

The news follows an announcement in October that revealed 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. LFL sales at Fresh & Easy declined by 2% in the third quarter.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," Tesco said in a statement.

Advertisement
Advertisement - Article continues below

The company has now appointed investment bank Greenhill "to assist with the review of options". Tesco said that it has received "a number of approaches" in recent months from parties interested in buying part or all of Fresh & Easy.

"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," Clarke said.

Advertisement - Article continues below

He added: "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."

Third-quarter trading

Group sales in the 13 weeks to November 24th rose by 2.4% including petrol at constant exchange rates (up 1.0% at actual rates) and by 2.9% excluding petrol at constant exchange rates (up 1.4% at actual rates).

As expected, while the food business in the UK continues to perform strongly, non-food sales have disappointed, with Clarke admitting that the general merchandise performance "was not good enough". Total UK sales including VAT and petrol grew by 1.7% and (up 2.3% excluding petrol) but LFL sales exclude VAT and petrol fell by 0.6%, as anticipated by analysts.

Internationally, Tesco noted that consumer spending in Central Europe had weakened further in the quarter, though this has been partly offset by a better performance in Asia. Total sales at constant exchange rates in each division increased by 1.1% and 6.8%, respectively.

The company said: "In the UK, ahead of the important seasonal period, and with the progress we have made so far on our plans to improve the shopping trip for customers, our outlook for the year as a whole is unchanged.

"Elsewhere, we expect the broad trends in the third quarter to continue through the balance of the year, in particular the increasingly tough conditions for consumers in Central Europe."

Advertisement
Advertisement

Recommended

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Why investors should be “cautiously bullish” for 2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Three ideas for Lloyds Bank's new boss
UK stockmarkets

Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.
12 Jul 2020
Why the moving average is my favourite charting tool
Sponsored

Why the moving average is my favourite charting tool

Traders and technical analysts use "moving averages" to iron out daily fluctuations and give a much clearer picture of a market's direction. Dominic …
13 Jul 2020