Tesco said this morning that when it leaves the US - though it has not yet been determined how that exit will be achieved - it will cost the company $1.8 billion (US), coming after a six-year period during which Tesco opened Fresh & Easy Neighborhood Markets in California, Arizona and Nevada, only to find that it seemed to have largely misjudged the habits and desires of American consumers.
“With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers,” Tesco CEO Philip Clarke said in a statement. “Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns.”
The New York Times reports this morning that the US debacle is not the only place where Tesco is feeling the pain: "Reporting a drop in profit for the year that ended Feb. 23, Tesco said business in South Korea and Europe was difficult. The economic crisis in Europe meant that consumers were cutting back spending and in South Korea, new restrictions in opening hours hurt sales.
"Even in Britain, Tesco is slowing its expansion. It said it decided not to go ahead with planned expansions of about 100 properties here, adding to a total write-down on its real estate of 804 million pounds. Tesco has been losing market share in Britain to cheaper rivals like the discount retailer Aldi, and it was affected by the horse meat scandal earlier this year, which forced it to withdraw some products."
The Financial Times reports that Tesco's finance director, Laurie McIlwee, "said efforts to extract Tesco from the US were 'going well,' but it could be 'at least another three months before we are able to conclude the process'."
And Reuters writes that McIlwee "said Tesco had received 'a lot of interest' in Fresh & Easy, both for the whole business and parcels of stores. 'What we're most interested in is those buyers that are interested in buying the complete business,' he said, noting that a clean sale would remove redundancy and onerous leasehold issues."
FT quotes Clarke as saying that Tesco “fought hard in the US," adding, "When I became chief executive I really did give it all I had. In the end, I’m responsible to investors and I know I can deliver more for them by leaving than I could by staying."
“With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers,” Tesco CEO Philip Clarke said in a statement. “Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns.”
The New York Times reports this morning that the US debacle is not the only place where Tesco is feeling the pain: "Reporting a drop in profit for the year that ended Feb. 23, Tesco said business in South Korea and Europe was difficult. The economic crisis in Europe meant that consumers were cutting back spending and in South Korea, new restrictions in opening hours hurt sales.
"Even in Britain, Tesco is slowing its expansion. It said it decided not to go ahead with planned expansions of about 100 properties here, adding to a total write-down on its real estate of 804 million pounds. Tesco has been losing market share in Britain to cheaper rivals like the discount retailer Aldi, and it was affected by the horse meat scandal earlier this year, which forced it to withdraw some products."
The Financial Times reports that Tesco's finance director, Laurie McIlwee, "said efforts to extract Tesco from the US were 'going well,' but it could be 'at least another three months before we are able to conclude the process'."
And Reuters writes that McIlwee "said Tesco had received 'a lot of interest' in Fresh & Easy, both for the whole business and parcels of stores. 'What we're most interested in is those buyers that are interested in buying the complete business,' he said, noting that a clean sale would remove redundancy and onerous leasehold issues."
FT quotes Clarke as saying that Tesco “fought hard in the US," adding, "When I became chief executive I really did give it all I had. In the end, I’m responsible to investors and I know I can deliver more for them by leaving than I could by staying."
- KC's View:
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It is becoming tiresome to keep saying this, but Tesco's inability to see the US market as it actually was seems like a classic case of epistemic closure. Its inability to adjust creates questions about a corporate culture that used to be the very model of responsiveness, efficiency and effectiveness.
