Thursday, July 26, 2012

Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More

The Insider - Heard On the Street

Regular followers (and if you aren't one, you should be) of our Fresh & Easy Buzz Twitter Feed are aware that for the last couple months we've been reporting there in real time on numerous interesting developments at Fresh & Easy Neighborhood Market's corporate headquarters in El Segundo, California - near-daily closed-door meetings in the offices of the CEO and retail operations chief, and the increasing use of interns to staff various positions, for example.

These developments, and two big ones announced to employees at yesterday's weekly staff meeting, are all about Tesco's struggle to stop the financial bleeding at now five-year-old Fresh & Easy, and its attempt to make good on the promise made by CEO Philip Clarke that the United Kingdom-based retailer will break even with Fresh & Easy Neighborhood Market by February 2014.

Clarke, a Tesco lifer (he started as a teenager stocking shelves) who became CEO of the global retailer in March 2011, said shortly after assuming the corner office from Terry Leahy that Tesco would break even with Fresh & Easy by February 2013. However, he added a year to his promise earlier this year, after Tesco reported a $249 million fiscal year loss at Fresh & Easy, which was a mere $4 million less than it lost on the grocery chain two years prior.

Mass Firings
Yesterday Fresh & Easy issued pink slips to between 40-50 employees at its corporate headquarters in El Segundo. The firings are designed to help Tesco cut its way to break-even with what former CEO Terry Leahy hoped and insisted (he still says it will be a success) would be the global retailer's American dream - Fresh & Easy.

But in the five years since Tesco launched Fresh & Easy it has invested around $2.3 billion and lost about $1.5 billion on the fresh food and grocery chain. The losses continue to the tune of nearly $5 million a week.

Tesco's original plan was to have at least 500-600 Fresh & Easy stores operating by now, on the way to 1,000 units in six to seven years from the November 2007 launch. Five years on there are 199 Fresh & Easy stores in California, Nevada and Arizona.

The firings yesterday were across the board rather than focused primarily on the real estate department as Tesco and Fresh & Easy's public relations representatives told various publications who reported it that way. There is a focus on real estate and construction but employees let go span the departments, from IT and operations to commercial.

Reducing Hours at 33 Stores

In a second attempt at cost-cutting - and this is the first time it's being reported anywhere - Fresh & Easy plans to reduce the store hours at 33 stores beginning soon. At present plans call for opening those stores at 9 a.m. instead of 8 a.m., and closing the poor-performing grocery markets at 8 p.m. instead of 10 p.m. Currently the standard hours for all stores is 8 a.m. (a few units open at 7 a.m.) to 10 p.m.

As part of this move, there will be some store-level firings and reductions in worker-hours at the 33 Fresh & Easy stores. Fresh & Easy Neighborhood Market, which hires all its store-level non-management workers on a part-time basis, has already been reducing hours of store employees chain-wide as part of its cost-reduction program designed to help it stop the bleeding at the fledgling grocery chain.

I'm also told by sources in positions to know such things that Fresh & Easy plans to cut some store-level jobs in existing units (besides the 33 stores) that have workers who came on board from the nearly 30 Fresh & Easy units that have been closed over the last couple years. Fresh & Easy absorbed these employees from the closed stores, which added to its labor costs.

And More

An additional move - what I call tinkering around the edges in terms of cost-cutting - Fresh & Easy also plans to eliminate the "Kitchen Table" food sampling stations in the few stores where they remain. (The grocery chain started a program to eliminate these stations in 2011 and replace them with mobile carts but still has some stores with the fixed food sampling kiosks.) The "Kitchen Table" fixed-kiosks are staffed full-time by an employee, hence their elimination in stores where they remain.

The headquarters firings have been a long time coming. Why? Not because the workers didn't do their jobs but because, as we've been saying regularly for years in the blog, the Fresh & Easy model and business just doesn't, in its present incarnation and management, have the legs to achieve break-even in any other way but by making massive operational expense cuts -- and that's what Tesco has essentially concluded. Fresh & Easy has also from the beginning been overloaded with senior and middle management for a chain its size.

Meanwhile, moral at Fresh & Easy's corporate office in El Segundo is lower than it's ever been, according to numerous employees who work there, despite whatever spin its CEO and public relations staff may put on it. I know of numerous employees there looking for new jobs. Some have even created a saying, "The interns are taking over," reflecting Fresh & Easy's growing use of the college students and recent graduates throughout the headquarters operation.

Moral is down at store-level as well. For example, I know of a group of top managers who, frustrated by Fresh & Easy senior managements inability to improve the chain's performance, have been meeting to talk about whether or not they have a future at the grocery chain.

Here's what one store manager told me today, in fact: "Having talked to many store managers today, the feelings are not good.  Most of the talk is around what we should do. Stick it out or get out now?  The consensus was it's time to start seriously looking. A few people are hoping to be bought by someone else."

The firings at corporate headquarters and other changes detailed in my piece are just the beginning at Tesco's Fresh & Easy. More cost-cutting is coming, as are other changes.

The cost-cutting is all about Tesco being able to show some progress in terms of reporting less of a loss (than last half year) for the upcoming fiscal half year. If it achieves that, Tesco can tell the many investment firm analysts who follow it, who will then report it to their investor-clients, that progress is being made. CEO Clarke needs this because it's crunch time - he can't remain credible if he were to change the break-even date for Fresh & Easy once again, say to February 2015 instead of February 2014, for example.

But CEO's are supposed to be big picture, policy guys - that vision thing, as former U.S. President George H.W. Bush liked to call it - not bean counters. Therefore, Philip Clarke should be asking himself one central question, which is: 'What is my vision for Fresh & Easy Neighborhood Market in America and how can Tesco achieve it?' But what, in my opinion, Clarke is probably asking himself is this: 'Can I get Fresh & Easy to break-even by February 2014, as I've publicly said I would, and then find a buyer for it?'

-The Insider

[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]

23 comments:

Anonymous said...

If only these brits weren't so stubborn in their ways they might have had a chance! Fix the produce dept (like redo the entire format) to where it actually is fresh! Also, Can't run a store w 2-3 associates in the store and offer the customer service the customers deserve! ALDI PLS BUY THEM OUT!

Matty B said...

I have read a lot of criticism about the produce section in the past (too much pre-packaged, lack of attention on expired goods etc..), but as far as I can see from my local stores (Mira Mesa and 4S Ranch) it seems to be fine now. The lack of available staff is still certainly an issue though.

Anonymous said...

As a former employee of Fresh 7 Sleazy...this is a long time coming and about time. We all new it. Its been a bad smell in the air the past 4 years. and as Anonymous stated "...if only the Brits werent so stubborn..." yea and I would like to add if only they werent so full of themselves as well. They came over to America with good intentions and started a company based upon "values" but its just too bad they didn't follow them themselves (this can be substantiated by the law suits over the years or the common feelings amongst the people who have been laid off last week or years prior). Basically the way they treat their employees has trickled down into the way they run their business. They can't treat Americans the same way they treat their sweatshop run stores in the UK and expect profitability. So FINALLY they are getting what they deserve...now disolve all of your assets and go bad to the UK. Cuz its not a "Great Place to Work". Now "ask more and tell" that bitches.

James Sinclair said...

Welcome back blog.

RE: Sampling station. As far as I know, every Fresno area store (I frequent three) has the same sampling area theyve always had, they were never changed out. Theyre not staffed full time, they simply set out samples and leave them out during the day, and the area is cleaned out by 6pm.

Sad to see hours changing. Hopefully none of the Fresno stores will see lower hours, although it would have been nice had they cut the Cedar/Shields store hours instead of shutting it down.

Matty B said...

@Anonymous - Just by swapping the countries around your vehement scold of Tesco is virtually identical to what many Asda employees in the UK said when their company got taken over by Walmart!

RomanLB said...

Bitter much, Anonymous? As a consumer, I would be VERY sad to lose F&E as a grocery option. As a decent human being, I would never wish failure on the employees who work to make the store a place I appreciate. I hope these changes ultimately lead to better business at Fresh & Easy. Thanks to F&E Buzz for keeping us posted...

Anonymous said...

With roughly 199 stores, roughly 5K employees, I'm surprised there's no more comments in here, so lets be bold here; They should have started the firing with Ashley Austen, Regional, who without a question, has tons of experience in the business (UK), yet so arrogant and dismissive like the rest of the brits in top exec positions that have no idea, or truly understand the american shopper. They talk about respect, living the values, and all of these concepts in Management training, yet execs fail to put it into action themselves when they walk their shops, they just won't listen. The top 3 things that F&E stood for were; Self check-out, code dated product, auto-mated self ordering system, all of which 5 years later are now trying to change (Alhambra, Lincoln) to the same way established succesful grocery companies have been doing for decades. The infrastructure was wrong from the get-go, and employee relations too forgiving with underperforming employees from CA's to DM's, which led District Managers to move the good employees around to put out the fires in underperforming stores. Who wants to keep doing that for the same wage, it's hilarious. Next are District Managers, these guys are running around like little assistants, with no real game changer ideas to drive the business, heck some store manager got promoted to DM when he himself couldn't even hold a store together asking the whole district for help every week, because it was in his contract maybe. On a last note, everyone knows when you open a new store, no matter in what industry, you operate at a loss, until eventually it can contribute to profit, so why did they opened so many stores in so little time, with not enough quality talent and store structure.

Anonymous said...

I disagree with anonymous about the way employees are treated. I feel we are treated well. As a matter of fact, we can't fire some of the deadbeats in our stores because our HR department believes in 'coaching in' rather than 'coaching out'. You must have been a real loser to have lost your job.
As far as the layoffs go, I work in one of the 33 stores who are laying people off. It sucks and moral is low. The rest of us who are left are hoping for the best.

Anonymous said...

I disagree with anonymous about the way employees are treated. I feel we are treated well. As a matter of fact, we can't fire some of the deadbeats in our stores because our HR department believes in 'coaching in' rather than 'coaching out'. You must have been a real loser to have lost your job.
As far as the layoffs go, I work in one of the 33 stores who are laying people off. It sucks and moral is low. The rest of us who are left are hoping for the best.

Anonymous said...

I have one comment concerning the real estate team. There are stores that were built in the ghetto, some locations were former drug stores that closed probably for the same reasons F&E could not keep them open - shoplifting, panhandling in the parking lot at all hours, vandalism... Take Lake Mead/LV Blvd in Las Vegas for example. This is a stone's throw from skid row where all the homeless shelters are located. It's also in the most Hispanic side of the tracks where there are plenty of very nice Hispanic markets who have loyal customers who will never leave. What the hell kind of idiot would open a Fresh&Easy on that corner? It's like they didn't even consult a local before building them!! Perhaps firing this real estate team is long overdue. -Bubba

Anonymous said...

F & E will do absolutely nothing about shoplifters... They watch them and let them take and take and take. And they wonder why they are losing so much money? It's easy... It's walking out the door and they let it! They should cut all the people from the loss and prevention department because they are not needed. Keep the store level employees... They are the ones doing their jobs.

Anonymous said...

Speaking from the Campus perspective. It pretty much sucks we lost several good people and kept the dumb a$$ dead weight. Brits are BEYOND arrogant and treat employees with no respect or appreciation. And wonder why they are failing… That feeling is wide spread to other campus locations. Helloooo all the execs and top management are Brits and are trying to run an American business... CLUELESS and unless they lay down the ego and actually listen to ideas on how to save money, it's not gonna happen. Sadly, got to hope for the best and plan for the worst there.

Anonymous said...

I couldn't agree more with the comment about Ashley Austen. I have never met a more arrogant man in my life. All the Brits are arrogant though and that has led them to where they are now. Instead of trying to reinvent the wheel, they should have adapted to what American consumers want.

We don't want to shop every day like in downtown London. We are more suburban than urban and we cook at home. Yes, a lot of people eat on the run, but not as much in southern California as say in NYC or DC.

A lot of good people I know personally got fired a few weeks ago. I feel for them because it's a result of too many promises by Tim Mason. Back when this started they said we would all be DMs by now and there would be a thousand stores......based on an untested business model in America.....maybe we should have known better.......

Anonymous said...

Sounds like a lot of sour grapes from some of you former F&E employees. Why? They paid you extremely well. More than you would have got at Safeway or Kroger, for example.

Anonymous said...

UMMM... Actually ur wrong Anon 8/8, they pay very bad compaired to most. CA's 10bux (not bad) other than them.. Horrible!! I've been there for a long time and these guys just don't get it and they never will.

Anonymous said...

Fresh & Easy pays big for the people who work at the head office. At the stores its $10 hour for CAs, worker bees, and $13 hour for team leaders. Those are worker bees who get to be called management.

The union has done a bad job of organizing. That's why no interest. But if they are smart, not, they would get out to the stores and start talking now because things are as far down as I've seen them.

I'm the CA who got let go Wednesday. Well, not the only one.

Anonymous said...

They should call it "Self Take-Out" instead of "Self Check-out". Some workers have been telling Management they need full service registers since the beginning. In the beginning it was our wages and benefits walking out the doors, now its hours and jobs. The Brits need to wake up and smell the tea. I've been told there wasn't a Brit laid-off at headquarters, either. Maybe they are doing their jobs, too???

Anonymous said...

Sorry to hear about the loss of your job! It's too bad that we didn't come together soon enough to turn this place around before they started blaming/punishing workers for Upper Managements mistakes. However, I can't fault the Union. They've been trying to help for some time now to help. Unfortunately, too many drank the kool-aid and believed that the Company would take care them. And boy did they! Though we can't change what has just happened, many current and past CA's and TL's, along with the Union and concerned community activist, are committed to changing Fresh and Easy's future. That's why we are joining "The Committe for Success". If you want to join to make sure some of your friends don't end up like you, call 1-800-230-5769. We hope you do!

Anonymous said...

It is very disapointing that we have a great deal of talent in our country to run this company correctly, however, they pick the worse possible people. All they do is hurt the employee and the company by using people to do a job that they are not qualified to perform. and that is because Ashley Austen does not understand people at all, or he would have a stronger team. in fact, the DM's that care are not with the company anymore or they stopped carrying and are to focus looking for a job elsewhere. Instead of training the employees correctly, focus on the consumer that buys from us and truly listening to the american team on what is needed to succeed they do the opposite, reduce labor hours, decrease products, reduce store operating hours and eliminate Americans, that is a formula that tells me, reduce cost and sell out to say the least.
The company must invest in our people it does not mean let them come and go as they please. it means reward the ones that should be rewarded and eliminate the ones that are not performing. There is a great deal of people in high ranking places that are working for fresh and easy for a free ride and have help destroy what others that care have build by working very hard. Every company that has done what this one is now doing have shut down or sold out.
All of fresh and easy employees need to stand together and say, enough is enough, either way, it will close down or sell out, and i hate to say this, but, without a union contract, we are done when this happens.

Anonymous said...

"Anonymous said...
It is very disapointing that we have a great deal of talent in our country to run this company correctly, however, they pick the worse possible people."

I guess OVER 125 years of AMERICAN grocery retailing expertise was NOT enough for them to tap into.

Anonymous said...

At the store level most Store managers have no respect for the Team. With HR/ER not present inside the building some Store Managers FREELY antagonize, insult, and verbally offend all team members. If you call the "hotline" nothing is ever resolved. If the SM happens to be a 3-4 year company vet they know the ER department and are given a slap on the wrist by their friend. As one SM told me "We wont be fired unless we hide shrink or falsify the time clock so your all stuck with my attitude." I never understood why grocery stores would need a union i was totally against it. I understand now.

Anonymous said...

I cannot wait to fne go down. Bitter? Yes I am. I was treated poorly (restraining order to prove it,) one of the stores robbed by the SM, and half the employees they do keep don't work. When you speak of LP that's a joke too. There is one person for LP in each region who flies in from another state to watch poor videos that don't catch anything. Steal away, they can't see you until AFTERWARDS fne is a joke. Only sad thing about this unethical company going under is the few good ones that have been there from the beginning.

Anonymous said...

Have been shopping at Aldi's in New Haven, love the store, the products, the prices... the quality of the products is remarkable..

I like the produce section... a lot, works good for me..

with the exception of stocking the shelves, and check out, the store runs itself... love the shopping cart thing, and brng your own bag thing..

the products are unusually high quality...

looking forward to having one near by in Encinitas, CA A+++++++ raring.