Tesco reported to the market today and while expectations were low on what to expect, the company did actually say something that the city has probably wanted to hear for some time, that the company is considering what to do with its loss making US operation, Fresh and Easy.
It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.http://www.digitallook.com/news/rns/20544734-10091/TSCO-Strategic_Review_of_Fresh_Easy_html
We have therefore appointed Greenhill to assist with the review of options. In recent months, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.
The chances are that this side of the business will be sold or at the very least a US based partner will be taken on, I expect it will be the former. There is a good chance that once this decision is finalised, Tesco's share price could see a boost, if only because it is one less negative for them to worry about. They got out of loss making Japan, so no one should be surprised if and when they do exit the US.
Just to add, from UK Analyst market report today.
ReplyDeleteTesco announced the likely sale of its US business Fresh and Easy as it attempts to cut its losses. Since its inception 5 years ago, Tesco has invested 1 billion pounds into the business and would have incurred cumulative losses of about 850 million pounds from the venture by next year. The business has failed to compete with the larger stores that dominate the country and it is one of these stores, Walmart, which been tipped as a potential buyer of Fresh and Easy, a move that would be in line with Walmart's decision to open more smaller stores. Separately, Tesco announced that group sales were up by 2.4% in the 13 weeks ending 24th November, including petrol and at constant exchange rates. The shares climbed by 10.8p to 337.45p.
Seems to be a long standing trend of retailers dominating the UK then expanding abroad and it is at that stage things seem to go pear shaped. Is it the US that is always one step too far? Shame as Tesco was doing so well until recent times, still this could be the low point - they do seem to be more competitive now on price.
ReplyDeleteTesco have had quite a lot of success overseas, around £1 billion of profit a year is from outside the UK. The major failures have been Japan and now the US, which to some degree the market has decided to focus on largely ignoring the overseas success elsewhere. Tesco have done pretty well in Europe and Asia. Sentiment has been against it, but that may start to change once the decision on the US is made. There is lots to like about the company as an undervalued share price recovery play once sentiment changes.
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