Business & Tech

Fresh & Easy Pulls Out of U.S. After Taking $1.8-Billion Hit

The British-owned grocery chain will sell some 200 grocery stores in California, Arizona and Nevada.

Ten weeks after Fresh & Easy announced Wednesday that it was still in the food fight and wouldn't be heading back across the pond, the corporate dithering at the British-owned Tesco grocery chain is finally over: Encino's Fresh & Easy Express and all other Fresh & Easy stores will be sold following a 96-percent drop in profits.

Tesco will end its five-year adventure in the United States by writing off $1.8 billion and terminating 5,000 employees. The schedule for closing and disposing of the stores has not yet been announced.

"We appreciate all the support and love we’ve received from our loyal customers and even though our parent company plans to leave the U.S., we’re pleased to confirm there are no plans to close any portion of Fresh & Easy," a member of Fresh & Easy's communications and public relations team said in an e-mail message to Patch. "While we don’t yet know who our new owner will ultimately be, Tesco has already received interest from a number of parties including groups looking to purchase Fresh & Easy as an operating business."

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Patch reported back in December 2012 and February 2013 that Tesco was in a quandary about what to do with its chain of about 200 European-style convenience grocery stores in California, Arizona and Nevada that seemed to puzzle American shoppers.

The hybrid operation featured prepackaged, often precooked meals in a smallish space, about one-fifth the size of American supermarkets, according to Mark Lacter of LA Biz Observed. All the checkouts were self-service, and assistance from employees was often hard to find. 

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In addition, Tesco was saddled with a 800,000-square-foot distribution facility the company built in Riverside. And there was the issue earlier this year of the San Diego attorney general, who fined Fresh & Easy more than $800,000 after finding that the grocery chain was overcharging customers.

The stores began opening in November 2007, just before the recession, when the sub-prime mortgage crisis forced most shoppers to pull in their belts. It was an era marked by the consolidation of supermarket locations and considerable competition from mass marketers such as Walmart, Costco, Ralphs, Whole Foods and even boutique stores such as Bristol Farms and Trader Joe’s.

"While Tesco has done well with its range of compact Metro stores in the UK—built close to public transport links so shoppers can grab a few items of food on their way home from work—the idea did not translate well to the U.S.," Marc Levinson, author of "The Great A&P and the Struggle for Small Business in America" told the Associated Press. "In the American west, most shoppers drive to supermarkets—sometimes just once a week—and will look for a broader range of products."

Analyst Neil Saunders of Conlumino in London told the Los Angeles Times that “the inevitably painful decision to cut and run was correct.”


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