Tesco Pushes Back Break-Even Estimate for Fresh & Easy

CHESHUNT, England — Despite reduced losses, Tesco here has pushed back the timeframe for reaching a break-even point for its Fresh & Easy Neighborhood Market chain in the U.S. until early 2014 rather than early 2013, the company said Wednesday.

"The business is on track to deliver a further significant reduction in losses during the current year, even though the timing of break-even will now be later than our earlier guidance," the company said. "This is because we intend to focus on delivering store-level profitability first before pushing on faster with the expansion we need to create sufficient scale to cover our overheads.

"We ended [the fiscal year on Feb. 28] with 185 stores, and this revised development program will take us to [approximately] 230 stores by February 2013, consistent with our more conservative approach to new capital commitment across the [Tesco] group."

For the year, the loss at Fresh & Easy was $245 million (U.S.), compared with $303.6 million a year ago. Sales for the year rose 26.3% to $1.02 billion, and comparable-store sales increased 11.9%.

The company did not release separate financial results for the second half; though it said comp-store sales rose 12.1%. Based on previously reported first-half results, the loss for the second half was about $80 million, with sales of $551.3 million.

According to a company statement, "Fresh & Easy has made encouraging progress against its demanding improvement plan. It reduced losses for the first time, delivering a reduction of 17.7% against last year, and delivered a sustained improvement in like-for-like sales throughout the year, even against very demanding comparatives and despite absorbing the implementation costs of the 'friends' loyalty program in the second half.

"This performance was driven by further improvements in the offer for customers as we extend the changes we have made at some stores to more of the estate. As a result, we are more confident about the outlook for the business, although clearly much remains to be done.

"Our first clear objective was to accelerate the already strong growth in customer numbers, and this is being met. The further changes we have been rolling out to the stores as we adapt the offer better to the needs of local customers have been very well received, including introducing in-store bakeries, loose produce, additional ranges in grocery [and] many new Fresh & Easy products. The impact of these improvements can also be seen in the performance of new stores."