Tesco Trims U.S. Investment

CHESHUNT, England — Tesco here said last week it plans to constrain capital investment in the U.S. during the second half, with only a handful of new stores planned for the balance of the fiscal year.

The company said it expects to operate “just over 200” stores by the end of its fiscal year next February, rather than the 230 it projected at the beginning of the year.

“Fresh & Easy is not where we want it to be, which is why future capital will be very tightly constrained,” Philip Clarke, chief executive officer, told analysts during a presentation here discussing first-half results. “We’re not going to open very many more stores in the U.S. in the rest of this year or into next year. Instead, our focus will be on getting more stores across the profit line.”

The company said 55 of its U.S. stores were “delivering a positive cash contribution” through the first half of the year, compared with 30 at the start of the year last February. “We expect an increased number of stores to cross over into positive territory in the second half,” the company noted.

Read more: Fresh & Easy ‘Fighting Nicely,’ Says Tesco CEO

“Fresh & Easy needs to do better,” Clarke said. “We need more from Fresh & Easy [because] as it turns out, sales growth wasn’t as strong [as expected] and losses were only slightly down.”

For the half ended Aug. 25, Tesco said the loss at Fresh & Easy Neighborhood Market was $118 million (U.S.) at constant rates, compared with $119 million during the first half a year ago, while sales at the 199 stores rose 16.4% to $586.7 million at constant rates, compared with $470.5 million at 177 stores a year ago.

Same-store sales, which rose 5.2%, picked up in the second quarter, Clarke said, “but they were weighed down by a disappointing first quarter.”