Philip Clarke, Tesco’s chief executive, said “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.”
Fresh & Easy has about 200 stores in California, Arizona and Nevada. Published reports indicate the exit could take at least another three months.
According to previous reports in the U.K.’s The Telegram, Fresh & Easy has held talks with some of its rivals, including Aldi and Trader Joe’s, to discuss selling the chain.
“However, a breakup of the company is the most likely option,” the paper reports.
Fresh & Easy has been plagued from its start in 2008. Analysts have called the venture a “disaster” brought on by a U.K. grocer that didn’t do its homework on American culture before jumping across the pond. Research firm The Hartman Group says Fresh & Easy “felt like a stranger in a strange land” with notions of “a hypothesized set of consumer ‘needs.’”
The company has said it did in fact perform market research. Marketing Director Simon Uwins is quoted as saying the company “went into people’s houses, talked to them about food and food shopping,” adding that representatives “poked” around consumer pantries.
A report from the Los Angeles Times blames failure to customize merchandise by neighborhood, not carrying well-known brands and restocking problems, among other issues.
In February 2009, Tim Mason, former CEO of Fresh & Easy, admitted that rumors were true: “We may have assumed that certain elements of the Fresh & Easy brand would do the work for us,” adding that the company didn’t plan to “go down and dirty on price.” However, Mason said such a philosophy might “have been a mistake.”
In December, CEO Clarke announced the company was performing a “strategic review” of Fresh & Easy. Tesco hired Greenhill & Co. for advisement during the process.
The Telegram reports that Sir Terry Leahy was CEO during Tesco’s initial international expansion drive and that he writes in his book, “Management in 10 Words,” that he accepts responsibility if Fresh & Easy fails in the U.S.
If critics are proved right, he writes, “it will have been my responsibility as CEO and a clear example that goals are easy to set, incredibly difficult to achieve and must carry a clear accountability.”
Tesco has invested more than $1 billion in El Segundo, Calif.-based Fresh & Easy and stands to lose “hundreds of millions” when Fresh & Easy closes, according to The Telegram.