Tesco PLC (LON:TSCO) (PINK:TSCDY) announced the departure of its veteran deputy CEO, Tim Mason, and its decision to take a step back from its U.S. plans for the Fresh&Easy chain on Wednesday.
Mason will leave the company immediately after 30 years of service.
Tesco PLC (LON:TSCO) (PINK:TSCDY) had high hopes for its Fresh&Easy business, investing 1 billion pounds ($1.61 billion) in it to take on super retailer Wal-Mart Stores, Inc. (NYSE:WMT). It will now initiate a “strategic review” of its U.S. business, reported The Guardian. CEO Phil Clarke said the company was reviewing a number of options, but it was “likely, though not certain” that Tesco will exit the U.S.
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
He added that Fresh & Easy “will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.” Recently, the company had interested parties presenting “a number of approaches” to either buy all or a portion of Fresh & Easy, or create a partnership with the company.
Clark will present an update on Fresh&Easy in April, when Tesco presents its full-year results.
Wednesday’s news comes amid recent poor sales numbers. In the third quarter, Tesco’s underlying sales in the UK dropped by 0.6%, and its group same-store sales, excluding gas, dropped 1.3%; this represented a fourth straight quarter for a decline. Clarke had noted that the general merchandise division’s performance was “not good enough”.
Its figures came in behind rival Sainsbury’s, which had recently announced a 1.7% rise and increasing market share.
Throughout 2012, the company has struggled and in January, Warren Buffet boosted his stake in the company.
London’s market and analysts responded positively to the news, as Tesco rose 4% on Wednesday morning trading to 340p, but U.S unions weren’t so happy for the effect it would have on workers.
Pat O’Neill, United Food and Commercial Workers union vice-president, said via the Guardian,
“Thousands of Tesco workers at Fresh & Easy stores in the US now face their holiday season filled with uncertainty and fear over whether their jobs and their stores will be there in the new year.””These job losses could have been avoided if Tesco PLC (LON:TSCO) (PINK:TSCDY) had chosen to engage with community stakeholders and its customers to address the many underlying problems and warning signs of the troubled Fresh & Easy model.”
O’Neill also requested that during the review process that Tesco included community and labor stakeholders.
For Fresh&Easy, its end comes after almost five years after former Tesco PLC (LON:TSCO) (PINK:TSCDY) CEO Terry Leahy launched it in 2007. The business never generated a profit, even with the large investment put into it. Criticism for the U.S. chain has included a lack of direction, with analysts anticipating a possible exit for quite some time, reported the Wall Street Journal.