US: Fresh & Easy comes under pressure from parent Tesco

Things are not easy at Fresh & Easy right now. Already struggling with economic concerns the chain is now feeling pressure put on it by British parent, Tesco.

Large shareholders, looking for Tesco to show recovery after recent poor results, have asked the company to pull out of Fresh & Easy.

The company's third-largest shareholder was quoted this weekend in the British media saying Tesco should focus on its core supermarket business in Britain. Other investors were more blunt in their assessment of the U.S. foray, with one anonymous shareholder labeling Fresh & Easy a "disaster."

Tesco opened Fresh & Easy to enormous fanfare in late 2007, boldly announcing plans to spend $2 billion to open hundreds of midsize grocery stores throughout California and the Southwest. The stores sell a variety of fresh organic foods and prepared meals at reasonable prices.

Fresh & Easy has 151 stores in California and 45 in Nevada and Arizona.

The grocery chain's early results fell short of expectations, and despite improvements, some analysts say it has a long way to go.

Some experts have already predicted that Fresh & Easy will never be able to validate the $2 billion that was initially invested.

In part because of the competitive California grocery market, it's doubtful Fresh & Easy will ever generate enough profit to validate the $2 billion in sunken costs.

"There's no question that it's a disaster," said Jim Prevor, president of Perishable Pundit, a website that follows the fresh food industry.. "Even if they manage to turn it around and make a few pennies … they have bigger problems because the UK market is in big trouble, and a lot of shareholders are saying it's time to cut bait and take care of business" in its much larger British market.

Fresh & Easy counters these arguments by saying that its sales have been rising and it is on target to break even by end of its fiscal year, February 2013.

"We have a clear target for break even, and in January we reported that we have continued our strong run of form," a company spokesman said in a statement.


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