Tesco may chalk up a £1bn write-down as it considers quitting its loss-making Fresh & Easy venture in the US.
The Daily Telegraph reported today that the size of the loss would be due to a write-down in the value of Tesco’s assets in the country, such as stores, leases and distribution centre.
In a separate Bloomberg report, Shore Capital analyst Clive Black put the cash costs of the exit at £250m ($382m).
Tesco declined to comment on the reports today.
Tesco CEO Philip Clarke said in December it was “likely” the retailer would quit the US, after announcing a strategic review of its Fresh & Easy chain and the departure of its CEO Tim Mason. “We’ve now concluded that Fresh & Easy is not going to deliver acceptable shareholder return in its current form,” Clarke said at the time, adding that sale or closure of the chain were potential courses of action.
In January, Tesco cut 50 jobs at Fresh & Easy.
Clarke is expected to give an update on Fresh & Easy when he delivers Tesco’s full-year results on 17 April.
“The decision to finally jettison Fresh & Easy, which hasn’t turned a profit in six years of operating, should be welcomed as a positive, if belated, step,” said Jon Copestake, retail analyst at The Economist Intelligence Unit, today. “The exit cost looks high, but Fresh & Easy has already racked up an estimated £850m in cumulative losses, with observers wondering why the current decision was not taken years ago.”
Fresh & Easy was founded in 2007 and has over 200 stores on the West Coast of the US.
In June 2012, Tesco paid £40m to offload its Japanese operations to Aeon Corp, Japan’s second-largest retailer.