EL SEGUNDO, Calif. — Tesco, the British-based parent company of Fresh & Easy Neighborhood Market here, may have to simply close its U.S. stores or seek multiple buyers, according to a report Thursday.

Fresh & Easy officials declined comment on the report in the Financial Times of London, which cited two sources close to the situation. Officials at Yucaipa Cos. — the Los Angeles-based investment firm that had reportedly been in talks with Tesco about taking over leases on some Fresh & Easy locations and turning them into a new version of Wild Oats — could not be reached.


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An industry source on Thursday told SN the sticking point in talks between Tesco and Yucaipa has beenTesco's desire to avoid retaining any liabilities for the U.S. stores. "When I heard Yucaipa was talking to Tesco, I knew it meant there were no other bidders because Yucaipa would not want to get stuck with all of Fresh & Easy's long-term leases when it already has so much debt with Pathmark and A&P," the source said.  

"With so many bad locations, no one is likely to want to take on those leases. Certainly Tesco could find other tenants for the stores and become a big landlord, but it wants to get out altogether, all at once."

The source speculated that only Aldi, which has plans to enter California, might be interested in taking over the leases "because it can generate enough volume to make it work as it puts itself on the West Coast map."

Read more: Yucaipa Said to Mull Fresh & Easy Buy

In June, Laurie McIlwee, Tesco's chief financial officer, said, “What we’re most interested in is buyers that are interested in buying the complete business. A clean sale would remove redundancy and lease issues.”

Tesco operates 200 Fresh & Easy stores in California, Arizona and Nevada. When it reported its financial results in April for the fiscal year ended Feb. 23, it said it was treating Fresh & Easy as a discontinued operation and taking a write-down of approximately $1.5 billion (U.S.). The loss in the U.S. totaled $1.8 billion for the fiscal year ended last February, compared with a loss of $533.6 million a year earlier.

“Leaving the U.S. is the right thing to do,” Philip Clarke, Tesco’s chief executive officer, said in April. Tesco also said it had received “a lot of interest” in Fresh & Easy — for the whole business and for groups of stores.

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