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Failure of Fresh & Easy stores to cost company £1.2bn
Following a failure to make a success out its US operation Tesco’s is to close all 199 of its Fresh & Easy shops, at a cost of £1.2bn.
Making the decision after a strategic review of Fresh & Easy, including the indications of interest received from third parties, Tesco said it would “exit from the United States” and that Fresh & Easy would been treated as a discontinued operation within the company’s 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. The total impact to profit after tax is £(1.2)bn, including £(169)m trading losses and £(1.0)bn non-cash items – predominantly the impairment of fixed assets and provisions for onerous leases”.
The impending closure of their Fresh and Easy operations came as the Tesco announced their annual results.
In a statement the company argued that the “announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today. With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers.
- £3.5bn trading profit – year-on-year performance largely reflects UK reinvestment
- Final dividend maintained at 10.13p, giving full-year dividend of 14.76p
- Strong online performance: Group sales of over £3bn for the first time – up 13%
- Confirming exit from the United States – process well-advanced
- F+F brand clothing sales now exceed £1bn in UK alone, with +9% LFL sales growth
The company now intends to build on their plans to ‘Build a Better Tesco’ and argues that there has been “real progress in the UK.
“We have already made substantial improvements to our customers’ shopping experience, which are starting to be reflected in a better performance”.
Philip Clarke, the group’s Chief Executive, comment that the company has “set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders. The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space”.
