British Retailer Tesco Looking at "Strategic Options" For Fresh & Easy Stores

An update from Fresh & Easy on January 31, 2013 (excerpt from F&E email):

We wanted to reach out to you to address numerous news and online reports about the future of our stores. 

Our parent company Tesco is conducting a strategic review of Fresh & Easy - they're looking at all options to find the best outcome for the neighborhood market that you - and we - have come to love. While we don't know exactly what that outcome will be, or if Tesco will continue to own the company, we're confident that Fresh & Easy can continue to be your favorite market.

We want to assure you: we don't have plans to close stores. We're still committed to providing delicious, wholesome and affordable food every day. We're still Fresh & Easy; open for business with everything that you enjoy about our store, with even more exciting things to come. That's why we're going to keep on fighting the good food fight.

Originally posted December 8, 2012:

On December 5th, British grocery retailer Tesco announced it is conducting a "strategic review" of its Fresh & Easy stores and is likely to exit the U.S. market. Tesco plans to report on its progress in this review in April 2003.

Fresh & Easy currently operates 200 stores located in Arizona, California and Nevada, including local Ventura County and adjacent area stores in Newbury Park, Oak Park, Moorpark, Camarillo, Simi Valley, Oxnard (2 stores), Ventura (2 stores) and Santa Barbara.

Tesco decided to launch the brand new supermarket chain in the U.S. in 2006, when the economy was still on a roll, before the big recession slammed us. Tesco started the Fresh & Easy chain from scratch, which takes a huge investment and patience to get to profitability.

In its April 2012 Annual Report, Tesco said it was "encouraged" by Fresh & Easy's progress, with 27% overall sales growth and 12% year over year growth in same store year sales. Tesco also said the timing of the chain breaking even would take longer than expected, possibly 2013/14. 

Tesco had 185 Fresh & Easy stores employing over 5,000 in February 2012. Fresh & Easy's revenues for it fiscal year ended February 2012 were 638 million British pounds, or roughly $1 billion U.S. dollars. But, they lost roughly $250 million on these sales last year. They were planning for nearly 230 stores by February 2013.

Of the 185 stores, 30 were cash-flow positive last year, while 118 were "very close" to it. This grew to 55 stores in September, when Tesco also indicated they were cutting back new stores from 230 to 200 by next February. For the first 6 months of fiscal 2013, Fresh & Easy lost another $120 million.  A slight improvement, but still bleeding red ink.

Now, 3 months later, they are pulling the plug. I guess after over $3 billion in cumulative operating losses and capital expenditures, Tesco is having second thoughts.

Personally I like Fresh & Easy. Although I don't do all of my shopping there, I do go there frequently for various items, including baked goods, some freshly prepared foods, snacks and other items. The local Fresh & Easy in Newbury Park has also been really great to work with for school fundraising.

It would be sad to see them go. But they may not go, if Tesco can sell the chain to new owners, who in turn would assess which locations should stay open and which ones should be closed. Tesco has indicated that in recent months it has been approached by potential buyers. I won't hold my breath on it but we'll see what happens.

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