Tesco Exits U.S. Market

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Sept. 11 (Bloomberg) -- Bloomberg’s Charles Allen reports on Tesco selling its ‘Fresh & Easy’ chain to Yucaipa and what leaving the U.S. market means for the company. He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

We knew this happening.

What you might say is it is it is appointment compared to what was expected in april.

A relief compared to what was expected in august.

They have sold most of the business and have only got to close a relatively small percentage of the stores.

There have been a fear that they would close all of them.

In april, they have many interested parties.

What went wrong here?

Was it just bad timing?

They opened in 2007 just before the credit crisis.

Was it about offerings?

I think it was at several levels.

One was no doubt the credit crisis and the subsequent housing crash.

They opened in areas with a population had been growing rapidly.

That went into reverse.

They had stores where there were no people.

You can see how that predictive model went.

Working out where the fastest growth might come from.

You can see how they ended up in those situations.

But i think on top of that, there are other lessons.

One is that grocery is a scale business and a local scale business and they have all remained subscale throughout the process.

Even now, i think it is better that it is going to continue in private ownership.

It is probably going to continue to lose money for a few years.

Is there a future for the business?

The people who bought it believe that there is an opportunity.

The u.s. grocery market is amazingly inefficient in many ways for such a developed country.

There is probably room for an offer.

One of the little things in the press release is 1300 people manufacturing and distributing out of 4000. you can see the level of cost for the offer at the center is probably still a bit high.

It will take a while to work its way through.

This marks the exit from the united states then.

The china business, a lot of focus on the international business and whether tesco is going to invest in the u.k.. what is the future here?

At the moment, internationally they have growth countries in thailand, malaysia, south korea.

There are others where they may need more retrenchment.

Turkey is one that comes to mind.

Tesco remains upscale and there has been a lot of corporate activity.

The u.k. need more focus as well.

They are still midway through the retrenchment there.

I think that could be -- as yet we haven't seen positive sales that they are hoping for.

They are well ahead of the other grocers in the u.k. aren't they?

They have the biggest business.

Pre-k's yes, they are not quite -- yes, they are not quite twice . charles, thank you for joining us.

Let's check in with the european commission president.

He is speaking of parliament at the moment.

This text has been automatically generated. It may not be 100% accurate.


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