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Tesco to Quit the U.S. Market

The British retailer will shutter the Fresh & Easy chain.

LONDON — British retailer Tesco, the world’s third-largest supermarket group, on Wednesday confirmed its plans to exit the United States as it reported a 95.7 percent contraction in overall year-end profits to 120 million pounds, or $184 million at average exchange, including the cost of the U.S. wind-down.

 

Tesco will shutter its 199 unprofitable Fresh & Easy shops at a cost of 1.2 billion pounds, or $1.84 billion at current exchange.

 

Tesco chief executive Philip Clarke said last year that the supermarket giant had planned to sell or close the stores.

 

“Based on our progress so far with our strategic review of Fresh & Easy, including the indications of interest received from third parties, we have confirmed that the outcome of the review will be an exit from the United States,” the company said in its statement for the fiscal year ending Feb. 23. “As such, Fresh & Easy has been treated as a discontinued operation within these results. Whilst the process is ongoing, and as such the form and final financial impact of the exit is still to be determined, we have written down the assets of the business and booked a provision for ongoing liabilities.”

 

In 2007, Tesco unveiled a new chain of grocery stores in the U.S. under the Fresh & Easy banner. The aim was to steal market share from competitors with small-format, neighborhood stores stocking fresh produce, but the idea failed to seduce U.S. consumers.

 

A series of headwinds also contributed to its failure, including the worldwide financial crisis and slowdown in the U.S. economy, stiff competition from local chains, such as Trader Joe’s, and a misunderstanding of the nuances of doing business in the U.S. market, which has proven famously tricky for British retailers.

 

In the 2012-13 fiscal year, Tesco — which has been undergoing a major restructuring under Clarke — reported an increase in group sales of 1.3 percent to 72.36 billion pounds, or $110.71 billion.

 

“Our plan to ‘Build a Better Tesco’ is on track and I am pleased with the real progress in the U.K.,” said Clarke in the statement. “We have already made substantial improvements to our customers’ shopping experience, which are starting to be reflected in a better performance. We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders.”