Breaking News ... Plus Analysis
Tim Ashdown, the former CEO of United Kingdom-based Tesco's Asia operations, who's essentially been running Fresh & Easy Neighborhood Market as its chief operating officer since arriving in May of this year, has been named CEO of the El Segundo, California-headquartered chain, replacing Tim Mason who departed Fresh & Easy and Tesco, where he was deputy CEO and chief marketing officer in addition to being CEO at Fresh & Easy, this week as part of Tesco CEO Philip Clarke's decision to exit the U.S. by either selling the 200-store grocery chain as a whole or in pieces, or if that fails, closing its doors.
Ashdown, who is responsible for the various changes (like testing full-service checkout in two stores) and workforce reduction measures at Fresh & Easy over the last eight months, was named CEO yesterday. The announcement was made to employees at Fresh & Easy's corporate office in El Segundo. Tesco's CEO, Philip Clarke, has been in Southern California this week.
Ashdown's key task as CEO, in our analysis, is to keep Fresh & Easy on life support until Clarke and Tesco's board can, the hope, find a buyer for the chain, which opened the doors of its first store in November 2007. That first store, in Hemet, California, has since been closed, along with 23 other Fresh & Easy units , because it failed to come even close to meeting the weekly sales numbers needed to continue in operation.
Tesco, which truth be known has no idea what to do with Fresh & Easy - and hasn't for a number of years - has hired the Greenhill investment firm to find a buyer for the chain. Failing to do that, Greenhill, which is also the firm trying to find a buyer for Supervalu, Inc., has been charged by Tesco to come up with other alternatives, which include selling the stores and the massive Riverside, California distribution center (and related campus properties) piecemeal.
Greenhill, which actually has been working on the project for some time, is going to have a difficult time of it. For example, only about 20% (30-40 units) of Fresh & Easy's 200-store base are in the black - and not by much. Additionally, many of those money-losing remaining 150-plus stores are bleeding tons of red ink, so much so that Tesco reduced the operating hours of 30-plus stores earlier this year, as we reported exclusively in Fresh & Easy Buzz.
Ask yourself this: Would you buy a grocery chain with only 30-40 of its 200 stores in the black?
Selling the stores piecemeal will be no easy task either. Only a few of the 200 units have sales of $150,000 or more per-week, for example. A few more are doing around $100,000 in average weekly sales. Still others, the bottom tier, aren't even close to approaching weekly sales of $100,000.
The 850,000 square-foot distribution center in Riverside is also a white elephant, which continues to bleed red ink for Tesco. The campus was built for a chain of 1,000 stores doing at least $3 billion a year in annual sales - and with a profit. There are 200 Fresh & Easy stores. Annual sales is a bit over $1 billion.
The facility is also custom-built for the "Fresh & Easy" way of doing business, logistics and distribution. It should eventually sell, but at a very low price, in our analysis.
Tesco of course wants to sell Fresh & Easy as a whole. Good luck.
As we've reported exclusively, discount grocer Aldi (we're still looking for another publication to do some reporting on what is a major development) plans to enter California in 2013. Aldi has an interest in some Fresh & Easy stores and the distribution center, according to our multiple sources. However we would be stunned were they to buy the entire Fresh & Easy operation, unless they get it at a fire sale price, which is possible.
Discounter Dollar General, which is opening numerous dollar stores and Dollar General Market grocery stores throughout California, Nevada and Arizona - the three states where Fresh & Easy does business - also has an interest in the chain. Again we would be stunned if Dollar General were to acquire Fresh & Easy as a whole. Dollar General has been acquiring vacant buildings for its stores in the three states on the cheap. The discounter also has a distribution center in Bakersfield, so doesn't need the Riverside facility.
Bottom line: We predict Tesco will have no choice but to sell Fresh & Easy off piecemeal; groups of stores and single stores, along with marketing the distribution center individually, or perhaps as a package along with a group of stores.
Tesco also has more than a score of Fresh & Easy locations sitting fallow; some with completed but empty stores, others undeveloped locations. It's nightmare; so many leases for so many fallow properties are out there we suspect many landlords are not getting all that much sleep this week.
There is interest out there for some of the Fresh & Easy stores. For example, more than one commercial real estate agent specializing in retail properties has contacted Fresh & Easy Buzz, seeking information about the chain and its stores. Our take from these interactions is that many retailers out there think they can get some stores for a huge bargain.
We've also been asked questions - looking for an informed and objective third party we take it - from representatives a couple retail chains, who are gleaning information about individual Fresh & Easy stores.
We also know of one party that has proposed a joint-venture of sorts with Tesco. In our analysis, it wouldn't fly.
But back at the ranch in El Segundo, Fresh & Easy's new CEO, Tim Ashdown, who's had a trial by fire since arriving in sunny and recently rain-soaked California in May - we reported his being moved from Asia to California exclusively here [ May 2, 2012: Reshuffling at the Top at Tesco: Retail Chief Adams Leaving Fresh & Easy For Turkey; China CEO Ashdown to Replace Him; Richie to Head China Operations] - has plenty more fire to wade through. We suggest a truckload of own brand, perhaps "Tesco's Finest," fire extinguishers might be a good idea.
Ashdown's biggest task, as we've said, is going to be keeping Fresh & Easy on life support between now and about March-April 2013, which is the time CEO Clark and the Tesco board hope to be able to dispose of Fresh & Easy - one way or the other.
Related Stories
December 4, 2012: The End is Here For Fresh & Easy: Mason Out as CEO; Tesco To Figure Out How to Exit U.S.
December 4, 2012: The End For Tesco's Fresh & Easy is Here
August 8, 2012: Fear & Loathing in the Aisles: Reduction in Hours and Selected Firings Begin Today at 33 Fresh & Easy Stores
July 28, 2012: Fresh & Easy Neighborhood Market Planning Major Renovations at Two California Stores
July 28, 2012: Fresh & Easy Neighborhood Market to Test Full-Service Checkout at Two California Stores
July 26, 2012: Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More
June 4, 2012: West Coast Bound - Aldi USA Headed to Southern California; First Stores to Open in 2013
April 10, 2012: Dollar General's California Dream Becoming Reality
Thursday, December 6, 2012
Tuesday, December 4, 2012
The End is Here For Fresh & Easy: Mason Out as CEO; Tesco To Figure Out How to Exit U.S.
Tesco has just announced in this statement it will conduct a "strategic review" of its 199-store Fresh & Easy Neighborhood Market chain, which is one of three options we reported yesterday the United Kingdom-headquartered global retailer would announce this morning. It's 7 am in the United Kingdom.
As part of the review, Tesco also announced that Tim Mason, who's been the CEO of Fresh & Easy since its start over five years ago, is leaving the company.
Mason, who's been with Tesco for over 30-years and is married to the daughter of a former Tesco CEO and Chairman, was given the added title of deputy CEO of Tesco in March 2011, following the retirement of Sir Terry Leahy, the former Tesco CEO who hatched the idea for Fresh & Easy. Philip Clarke replaced Leahy as CEO.
Mason, who lives in Southern California and has made millions of dollars in salary and bonuses while CEO of Fresh & Easy, was also given the position and title of chief marketing officer for Tesco last March, which was the position he held at the global retailer before departing for America in 2006 to head up its now failed fresh food and grocery retailing venture as CEO.
Here's what Tesco and its CEO Philip Clarke said (italics) about the "strategic review" in a very brief press statement just released:
In October, we announced that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores.
It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.We have therefore appointed Greenhill to assist with the review of options. In recentmonths, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.We are also announcing that Tim Mason is to leave Tesco after 30 years' service with the company.“I have been clear since my appointment as CEO was announced that my role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully-informed assessment of its longer term potential.“Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration. “Tim Mason, who leaves Tesco today, has played an important part in our success over a 30 year career with the company, and he leaves with my thanks and good wishes.”
Tesco also just posted a piece in its 'Talking Shop' blog from Philip Clarke, which you can read here.
Clarke makes it very clear in both the corporate news release and in his blog post that Tesco will exit the U.S. with Fresh & Easy one way or the other - be it the sale of the chain as a whole (very unlikely to happen), selling it off in pieces, or closing the operation and moving on - as we've been reporting all year would be the case, and as we correctly reported in this piece yesterday: "The End For Tesco's Fresh & Easy is Here."
Like we reported on Tuesday, the end is hear for Tesco's Fresh & Easy, regardless of when it occurs or how the disposition comes down.
As part of the review, Tesco also announced that Tim Mason, who's been the CEO of Fresh & Easy since its start over five years ago, is leaving the company.
Mason, who's been with Tesco for over 30-years and is married to the daughter of a former Tesco CEO and Chairman, was given the added title of deputy CEO of Tesco in March 2011, following the retirement of Sir Terry Leahy, the former Tesco CEO who hatched the idea for Fresh & Easy. Philip Clarke replaced Leahy as CEO.
Mason, who lives in Southern California and has made millions of dollars in salary and bonuses while CEO of Fresh & Easy, was also given the position and title of chief marketing officer for Tesco last March, which was the position he held at the global retailer before departing for America in 2006 to head up its now failed fresh food and grocery retailing venture as CEO.
Here's what Tesco and its CEO Philip Clarke said (italics) about the "strategic review" in a very brief press statement just released:
In October, we announced that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores.
It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.We have therefore appointed Greenhill to assist with the review of options. In recentmonths, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.We are also announcing that Tim Mason is to leave Tesco after 30 years' service with the company.“I have been clear since my appointment as CEO was announced that my role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully-informed assessment of its longer term potential.“Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration. “Tim Mason, who leaves Tesco today, has played an important part in our success over a 30 year career with the company, and he leaves with my thanks and good wishes.”
Tesco also just posted a piece in its 'Talking Shop' blog from Philip Clarke, which you can read here.
Clarke makes it very clear in both the corporate news release and in his blog post that Tesco will exit the U.S. with Fresh & Easy one way or the other - be it the sale of the chain as a whole (very unlikely to happen), selling it off in pieces, or closing the operation and moving on - as we've been reporting all year would be the case, and as we correctly reported in this piece yesterday: "The End For Tesco's Fresh & Easy is Here."
Like we reported on Tuesday, the end is hear for Tesco's Fresh & Easy, regardless of when it occurs or how the disposition comes down.
The End For Tesco's Fresh & Easy is Here
We've been reporting exclusively all year that the end of Tesco's Fresh & Easy Neighborhood Market - 199 stores in California, Nevada and Arizona - is near.
Now, according to our sources, the near is here: Tomorrow Tesco could announce that it's either selling or will pull the plug and close its five-year-old U.S. fresh food and grocery chain, which has racked up loses of nearly $2 billion.
If Tesco doesn't announce either of these two moves tomorrow when it reports its holiday season trading numbers to date - and based on our reporting we haven't been able to confirm there is a buyer for Fresh & Easy - it will announce it's launching a "formal review" of Fresh & Easy Neighborhood Market, which is merely a way to buy some time in order to further search for a buyer.
As we've reported previously, Tesco has been formally reviewing Fresh & Easy since earlier this year when Tesco CEO Philip Clarke brought in former Asia operations CEO Jeff Ashdown to essentially take over day-to-day operations of the Southern California-based grocery chain.
Tesco's CEO and its board know the status of the chain (if not Tesco investors are in real trouble) - another $100 million dollar-plus loss for the current fiscal year which ends February 2013 is on the way, for example - which is why an announcement of a "formal review" would merely be a stall tactic.
Tesco reported a $250 million loss for Fresh & Easy for its most recently-ended fiscal year. We expect the loss for this fiscal year, which ends February 2013, to be slightly but not much less than that because of the massive layoffs, some cost-cutting, and the halt on new store openings at Fresh & Easy since August of this year.
Further evidence that the end is here: There are numerous Fresh & Easy stores completed and previously slated to have been opened in the third and fourth quarters of this year, like the units in Los Angeles and Sunnyvale, California which a construction firm contracted to Fresh & Easy handed over to the chain a couple months ago, that haven't been opened. The two locations are at the top of what is a list (planned new store roll out) of stores Fresh & Easy has wanted to open but hasn't been allowed to by parent Tesco.
Nobody needs a formal review to know that when a grocer doesn't open stores it's spent millions of dollars to have built, its CEO, in this case Tesco CEO Philip Clarke, doesn't see a future for the operation. Translation: The end of Fresh & Easy is here regardless of what Tesco says tomorrow morning about its U.S. operation.
As we've reported exclusively, Tesco has been trying to sell Fresh & Easy for some time. Among the potentials we've reported on are Aldi and Dollar General.
Additionally, we've also reported there's been "feelers" out to various commercial retail real estate agents for some time, the goal of which has been to "dispose" of Fresh & Easy, either as a whole chain or in bits and pieces. Tesco has also, as we've reported, been trying without success to either sell or sublease a number of the numerous store locations it has but has never opened.
At present we can't conclusively report a sale of Fresh & Easy, or that if a deal to sell the chain hasn't been inked that Tesco will pull the plug and close its Southern California-based food and grocery retailing operation.
But we can report the end of Fresh & Easy is here. And it's here regardless of when or the form in which Tesco disposes of it.
Stay tuned though, as we continue to work the story.
Note: Read through the tweets from all of 2012 at www.twitter.com/freshneasybuzz (as well as the blog) for a natural progression of our reportage about the end of Tesco's Fresh & Easy being "near" to its end being "here."
Breaking...More to come...
#
Now, according to our sources, the near is here: Tomorrow Tesco could announce that it's either selling or will pull the plug and close its five-year-old U.S. fresh food and grocery chain, which has racked up loses of nearly $2 billion.
If Tesco doesn't announce either of these two moves tomorrow when it reports its holiday season trading numbers to date - and based on our reporting we haven't been able to confirm there is a buyer for Fresh & Easy - it will announce it's launching a "formal review" of Fresh & Easy Neighborhood Market, which is merely a way to buy some time in order to further search for a buyer.
As we've reported previously, Tesco has been formally reviewing Fresh & Easy since earlier this year when Tesco CEO Philip Clarke brought in former Asia operations CEO Jeff Ashdown to essentially take over day-to-day operations of the Southern California-based grocery chain.
Tesco's CEO and its board know the status of the chain (if not Tesco investors are in real trouble) - another $100 million dollar-plus loss for the current fiscal year which ends February 2013 is on the way, for example - which is why an announcement of a "formal review" would merely be a stall tactic.
Tesco reported a $250 million loss for Fresh & Easy for its most recently-ended fiscal year. We expect the loss for this fiscal year, which ends February 2013, to be slightly but not much less than that because of the massive layoffs, some cost-cutting, and the halt on new store openings at Fresh & Easy since August of this year.
Further evidence that the end is here: There are numerous Fresh & Easy stores completed and previously slated to have been opened in the third and fourth quarters of this year, like the units in Los Angeles and Sunnyvale, California which a construction firm contracted to Fresh & Easy handed over to the chain a couple months ago, that haven't been opened. The two locations are at the top of what is a list (planned new store roll out) of stores Fresh & Easy has wanted to open but hasn't been allowed to by parent Tesco.
Nobody needs a formal review to know that when a grocer doesn't open stores it's spent millions of dollars to have built, its CEO, in this case Tesco CEO Philip Clarke, doesn't see a future for the operation. Translation: The end of Fresh & Easy is here regardless of what Tesco says tomorrow morning about its U.S. operation.
As we've reported exclusively, Tesco has been trying to sell Fresh & Easy for some time. Among the potentials we've reported on are Aldi and Dollar General.
Additionally, we've also reported there's been "feelers" out to various commercial retail real estate agents for some time, the goal of which has been to "dispose" of Fresh & Easy, either as a whole chain or in bits and pieces. Tesco has also, as we've reported, been trying without success to either sell or sublease a number of the numerous store locations it has but has never opened.
At present we can't conclusively report a sale of Fresh & Easy, or that if a deal to sell the chain hasn't been inked that Tesco will pull the plug and close its Southern California-based food and grocery retailing operation.
But we can report the end of Fresh & Easy is here. And it's here regardless of when or the form in which Tesco disposes of it.
Stay tuned though, as we continue to work the story.
Note: Read through the tweets from all of 2012 at www.twitter.com/freshneasybuzz (as well as the blog) for a natural progression of our reportage about the end of Tesco's Fresh & Easy being "near" to its end being "here."
Breaking...More to come...
#
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