Tesco says Fresh & Easy ‘fighting nicely’
LONDON, Sept 19 – Tesco’s loss-making Fresh & Easy chain in the United States is “fighting nicely” in a tough market, the chief executive of the British retailer said today, underlining his belief that the chain can have a profitable future.
Tesco boss Philip Clarke has this year rejected investor calls to withdraw from the United States, though he told shareholders at their annual meeting in June he would pull the plug on the business if it continued to disappoint.
Speaking at the World Retail Congress (WRC) today, Clarke gave the West Coast chain, which trades from nearly 200 stores, a renewed vote of confidence.
“The stores that we have continue to grow nicely and the reason it’s worth persisting is that the stores themselves fulfil a particular need for a particular group of customers,” he said.
“It’s only five years old, it’s playing in a play ground with some very big and very old retailers who are very wise and it’s fighting nicely.”
In April, Clarke said he did not expect Fresh & Easy to break even until its 2013/14 financial year, against a previous target of 2012/13.
Tesco, the world’s third-biggest retailer, has slowed its expansion plans for Fresh & Easy and though the chain’s underlying sales growth slowed to 3.6 per cent in its fiscal first quarter from 12.3 per cent in the fourth quarter of the previous financial year, the CEO said operational improvements, such as new product ranges, were having an impact.
“Already the changes that we’ve been making have gone some way to prove that’s there’s life in Fresh & Easy yet,” he said.
“We’ll continue to hopefully see those sales grow and it move towards profitability.”
Once one of the most consistent British companies in terms of earnings growth, Tesco stunned investors in January with its first profit warning in more than 20 years.
In April, Clarke, a Tesco career lifer who as a youth stacked shelves in his local store, also slashed expansion plans for the business in Britain and said he would spend over £1 billion (RM4.98 billion) on improving stores and online shopping in a bid to reverse a decline in market share.
Tesco will report first-half results on Oct. 3.
In his speech at the WRC, Clarke said digital technology was shifting the “tectonic plates” of the retail industry. He expected that this Christmas one in five online orders in the UK would be made on a mobile device.
Shares in Tesco, down 8 per cent over the last year, were 0.2 per cent lower at 343 pence at 1350 GMT, valuing the business at about £27.7 billion. – Reuters