Tesco to pull down shutters on US venture

 
Michael Bow
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TESCO will call time on its ambitious bid to crack the US market this week as the supermarket giant braces itself for a 10 per cent slide in company profits.

The country’s biggest retail chain is set to announce plans to close, sell or break up its US subsidiary Fresh & Easy following the end of a four-month strategic review into the loss making business by chief executive Philip Clarke and Greenhill & Co.

Fresh & Easy, a Los Angeles-based venture pioneered by former Tesco chief executive Sir Terry Leahy in 2007, has failed to dent the grip of larger US chains, posting a £157m loss last year, with another £130m loss predicted for this year.

Analysts have warned the move could result in a £1.1bn balance sheet writedown for the company and a £250m cash loss, as Tesco seeks to unwind the venture. Potential buyers of the whole or parts of the company if it is sold include Walmart, Aldi USA, and Aldi’s boutique retail store Trader Joes.

The keenly watched results, due on Wednesday, will also give some indication into progress made on Clarke’s watch to turn around the business after its shock profit warning issued last January.

Analysts are forecasting a 10 per cent dip in pre-tax profits down to about £3.5bn from £3.9bn, but lower capital expenditure forecasts for the future could free up more cash for a share buyback, which has boosted investor sentiment.