Tesco Faces Investor Pressure

EL SEGUNDO, Calif. — The parent of Fresh & Easy Neighborhood Market here last week reiterated its goal to break even at its U.S. operations by the end of its current fiscal year next February after investors questioned the wisdom of the company’s ongoing investment in the banner.

“We have a clear target for break-even, and in January we reported we have continued our strong run of form,” Cheshunt, England-based Tesco said in a statement, repeating comments made earlier this year.

A spokesman for Fresh & Easy told SN the company is in a “quiet” period — pending the scheduled release of year-end results this week — and consequently could not comment further on published reports that the challenges Tesco in the U.K. could affect its longevity in the U.S.

Tesco reported its first earnings warning in two decades in January — saying it had seen “more strain than anticipated on our profitability” and forecasting “trading profit growth to be around the low end of the consensus range” — which reportedly has prompted calls from some shareholders to pull back from its U.S. operations.

David Gray, an analyst with Planet Retail, London, said he doubts Tesco will announce any decision regarding its U.S. operations for several months, probably until it reports half-year results.

“When it releases year-end results Tuesday, it will probably say it’s not in a position to decide yet. But by the half-year point it will have a better idea whether it’s on target for Fresh & Easy to meet its break-even goal by next February.”

One of Tesco’s largest shareholders said Tesco needs to “think long and hard about what it wants to be — can it be everything to everyone, or should it focus on its gem, the British grocery business? Of course, this is likely to raise questions about other areas of the business, such as America.”