Buried on page 18 of the Tesco results presentation was a section on its Japanese operations, with a brutally blunt heading at the top: ‘Discontinued’.
The same can’t yet be said of the retailer’s US operations, the much maligned Fresh & Easy chain. Its improving – but still loss-making – performance was covered the preceding pages.
But listening to chief executive Philip Clarke talk about his reduced ambitions for cracking the States, observers couldn’t help but be left with the feeling that the clock is ticking – whatever Clarke may say about scrapping deadlines for breaking even.
His comments sounded a lot like the dreaded ‘vote of confidence’ from the chairman that invariably precedes a football manager’s sacking, despite Clarke predicting that 2013-14 could see breakeven finally come to pass, seven long years after launch.
“I’m not going to set a timeframe for the US,” he said. “I don’t feel I need to.”
At the same time, he revealed that Tesco would be slowing its expansion in the country, while admitting that many shareholders remained unconvinced of the need to be there at all.
“We need to persuade our investors that we can get there,” Clarke said – hardly the sort of material to get people all fired up about Fresh & Easy’s long term prospects.
The chart on page 16 of said presentation showed an arrow pointing in the right direction when it comes to store profitability. Yet only 30 out of the 186 Fresh & Easy stores are currently in the black.
Clarke has made it clear that Tesco is going to let “extreme caution” guide its expansion for the foreseeable future, as it concentrates on the £1bn turnaround plans for the UK.
A growing number of shareholders would like him to go further and end this chapter of the special relationship for good, despite the likes of Shore Capital analyst Clive Black arguing it would amount to “corporate vandalism”.
The nagging doubt remains, however, that such as a decision might still come back to haunt Tesco.
If it does call time on Fresh & Easy, like one of the many UK music artists who failed to ‘crack’ America, Tesco might end up looking back and wondering what might have been.
As Clarke said of the Far East: “I pulled out of Japan and I pulled out of Taiwan. I was going to pull out of Malaysia but now we are number one there in hypermarkets.”
It’s highly unlikely Tesco will ever have a US number one. But if it pulls out now, the ‘what if’ factor will be huge.
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