Fresh & Easy chain issued ultimatum by UK parent

fresheasy.jpgThe El Segundo-based grocery chain now has to "persuade" the chief executive of its British-based owner that it has a future. For now, Tesco CEO Philip Clarke is cutting off capital expenditures in the U.S. to "nearly nothing." Clarke issued a similar ultimatum to Tesco's Japanese business before deciding to sell the operation. For all its ambitions, Fresh & Easy has been one of those concepts best described by what it is not - not a full-scale supermarket, not a boutique grocer (Bristol Farm), not a quirky institution (Trader Joe's), not particularly health conscious (Whole Foods), and not a low-cost warehouse. Not a great way to build a business. During the first half of the year, Fresh & Easy lost about $120 million. I'm guessing its competitors are circling the locations. From Guardian columnist Nils Pratley:

Clarke seems determined to torture his shareholders with uncertainty over Fresh & Easy. "Must do better" was the gist of his verdict this time, but he's been expressing similar sentiments for the past year. Constraining the supply of capital to Fresh & Easy is a sensible short-term measure but, sooner or later, he'll have to decide whether to stay in the US or flee. Sooner - meaning no more than a year - would be better.

From Supermarket News:

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

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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