Fresh & Easy Store Closures 'Relatively Significant'

EL SEGUNDO, Calif. — Fresh & Easy Neighborhood Market here said last week it plans to close 12 underperforming stores temporarily over the next four weeks as part of its effort to reach profitability by the close of the fiscal year that ends in February 2013.

“There’s not enough growth in sales or customers at those stores to justify keeping them open,” said Brendan Wonnacott, a spokesman for the chain.

Prior to the closures, Fresh & Easy — the U.S. division of London-based Tesco — was operating 187 stores. The company plans to open two more locations later this week, Wonnacott said. 

Suzanne Long, Boise, Idaho-based retail practices leader for SSA & Co., said she believes other grocery operators could take a page from Fresh & Easy in terms of closing stores on a temporary basis.

“Trying to keep underperforming stores open is a systemic issue for the industry, but Fresh & Easy is taking an interesting approach — saying it prefers operating stores that are profitable and then reconsidering what to do with the stores it closes when the economy or other circumstances change.

“If Fresh & Easy were truly struggling, I’m not sure it would be making growth plans as aggressively as it is, with at least 50 more stores already announced. Saying it is closing stores temporarily is probably related to an inability to get out of long-term leases, though those stores may be seen as more viable properties for future business.”

Jim Hertel, managing partner at Willard Bishop, Barrington, Ill., said closing stores is “a relatively significant event, and closing 25 of 187 stores over a two-year period [including 13 in late 2010] represents roughly 13% of Fresh & Easy’s store base, which is a high rate of closings — and I’ve never heard of closing stores temporarily.”

Mike Griswold, Boise, Idaho-based research vice president for Gartner, Boston, also said he is not aware of any operators who close stores on a temporary basis. “These Fresh & Easy closings are probably more permanent than the company would like to let on, though this move obviously indicates an effort to get the balance sheet to zero or to a little bit of profitability before they figure out what to do with those stores.

“Given the top leadership changes at Tesco and the [economic] challenges, it’s clear the parent company sees 2013 as the line in the sand to decide if it will move forward in the U.S. or not.”

Fresh & Easy is scheduled to open its third Express unit — in Burbank, Calif. — this week, along with a conventional store in Santee, Calif.

Fresh & Easy plans to add seven Express stores, including the ones in Hermosa Beach and Burbank.

The stores set for closing include seven in Southern California (Anaheim, Bakersfield, Baldwin Park, Fountain Valley, Fresno, Hemet and Ontario) four in Phoenix and one in Las Vegas.  All opened between late 2007 and early 2010.