Tesco's Fresh & Easy By the Numbers ... In Case You Want to Keep Score at Home or in the Office

Photo credit: Fresh & Easy Buzz.

Analysis/Commentary

Tesco's Fresh & Easy Neighborhood Market opened two new stores today - a 3,000 square-foot Fresh & Easy Express unit at Crown Valley Parkway and Golden in Laguna Niguel, California, and a standard 10,000 square-foot Fresh & Easy fresh food and grocery market at Silver and Goettingen, in San Francisco's Portola District.

The opening of the two stores today brings to eight the number of Fresh & Easy units Tesco has opened so far this year. (see the locations of the eight stores here.)

Fresh & Easy Neighborhood Market ended 2011 with 184 stores in California (135 units), Nevada (21 units) and Arizona (28 units).

The eight new stores opened thus far in 2012 brings the total store-count for the fresh food and grocery chain to 192 units - 143 stores in California, 21 Fresh & Easy markets in Nevada and 28 units in Arizona.

But not for long...

As regular readers of Fresh & Easy Buzz are aware, we broke the news on January 9, 2012 (see story here) that Tesco's Fresh & Easy Neighborhood Market was planning to close 12 stores. On January 10 (see here) we followed up our story with a second scoop, in which we listed the locations of the 12 stores set to be closed. Following the publication of our stories, Fresh & Easy's corporate spokesperson announced the store closures.

All 12 stores (see the locations here) are set to be closed by the end of this weekend. (The latest store closures follow the closing of 13 Fresh & Easy stores in November 2010.) Therefore, Fresh & Easy's 192 store-count is a temporary metric.

Come next week, Fresh & Easy Neighborhood Market will be a 180-store chain - 136 units in California, 20 stores in Nevada and 24 units in Arizona - and Tesco will be operating four fewer Fresh & Easy stores than it was at the end of 2011.

But not for long...

The 180-store number is also a temporary metric: Tesco plans to open a number of Fresh & Easy stores this month, and many more, including its first units in metro Sacramento, California, in March. Additional stores are set to open this year as well.

One of the next stores to open will be the Fresh & Easy Express unit, Tesco's fourth 3,000 square-foot micro-format food and grocery store so far, at Figueroa Street and Jefferson Boulevard, near the University of Southern California campus, in Los Angeles. The store opens February 15.

Tesco plans to open five more "Express" stores between now and the end of March 2012. (See the locations of the eight 'Express' stores here.)

Additionally, Fresh & Easy Neighborhood Market is planning a ninth Fresh & Easy Express store in the Southern California city of Bell. Plans for the store are currently before the Bell City Council.

On November 15, 2011 Fresh & Easy Neighborhood Market sent out a press release in which it said it plans to open 20-plus new stores from January-March of this year. The release listed just the cities the stores would been in but not the addresses.

But we had already reported on the grocery chain's early 2012 new store opening plans, including publishing a list of 28 stores Fresh & Easy was preparing for early 2012 openings. The grocer has yet to publicly announce the majority of the stores on our list. [See our story - November 15, 2011: Fresh & Easy Neighborhood Market to Open 20-Plus New Stores in Early 2012 - We Have What's Not in the Press Release. See the list of 28 stores here.

If Fresh & Easy opens 20 or more (all 28) of the stores by the end of March, that will give the Tesco-owned chain around 200-208 total stores come April Fools Day.

Tesco's fiscal year ends on February 27, 2012. We expect Fresh & Easy to closeout Tesco's 2011/12 fiscal year with no more than 190 stores open and operating.

Tesco's original plan for Fresh & Easy, which former CEO Terry Leahy continued to tout as late as fall 2010 in a meeting with some financial analysts at Fresh & Easy Neighborhood Market's campus facility in Riverside County, California - he retired at the end of February 2011 - was to have 1,000 stores open and operating over a five-to-six year period, beginning in November 2007, which is when the first Fresh & Easy stores were opened.

Four years and a couple months later, there are 180 Fresh & Easy stores.

Tesco CEO Philip Clark, who took over for Leahy in March 2011, revised that 1,000-store public relations fantasy soon after assuming the corner office at Tesco's corporate headquarters in the United Kingdom, announcing that the new plan was to have 400 Fresh & Easy stores open and operating by the end of Tesco's 2012/13 fiscal year, which ends in February 2013, at which time he says the United Kingdom-based global retailer will break-even with Fresh & Easy Neighborhood Market, which lost $112 million in the first half of this fiscal year, on sales of $470 million.

A couple months later, however, Clark announced that instead of 400 stores being needed to break-even with Fresh & Easy, the new magic number was 300 stores, which he said last year is the number of Fresh & Easy units Tesco plans to have open and operating by the end of February 2013, when the 2012/13 fiscal year ends. He said, and continues to say, Tesco will break-even with Fresh & Easy Neighborhood Market at that time, with 300 stores.

Even assuming Tesco were to have 200 Fresh & Easy units open by the end of fiscal 2011/12 (February 27, 2012), that would still mean the retailer needs to open 100 stores from March 2012 to February 2013, in order to reach the magic 300 units. It's going to be a very difficult task for the retailer to do though, considering its about double the amount of new Fresh & Easy stores Tesco will have opened by the end of this fiscal year. It's also about half the number of Fresh & Easy stores Tesco has opened since November 2007.

But, frankly, the math has been fuzzy when it comes to Tesco and its Fresh & Easy chain from day one.

We expect Tesco to report a fiscal 2011/12 loss for Fresh & Easy in the $190 million-to-$230 million range, on sales of about $1 billion. If we're correct (and even if the loss is slightly less than $190 million) that means Tesco has one year to go from that loss amount to break-even, or close to it, based on CEO Clarke's statements about breaking-even with Fresh & Easy by the end of fiscal 2012/13.

To put this in perspective, if Tesco loses $200 million on Fresh & Easy in fiscal 2011/12, which ends in a little over three weeks, it will be an improvement of just $53 million over the $253 million it lost on Fresh & Easy in its 2009/10 fiscal year. That loss was on sales of $544 million. As noted, we project sales of about $1 billion, nearly double two fiscal years' ago, for Fresh & Easy for fiscal 2011/12.

Tesco lost about $300 million, on sales of about $818 million, on Fresh & Easy in its 2010/11 fiscal year, which ended February 26, 2011. There were 164 Fresh & Easy stores open at the end of the 2010/11 fiscal year.

About $55 million of that loss can be attributed to Fresh & Easy's buyout of its produce (Wild Rocket Foods) and meat (2 Sisters Food Group) suppliers, however. If you deduct the $55 million, it still leaves a loss of $245 million for the most recently-ended fiscal year, an improvement of only $8 million over the $253 million loss in fiscal 2009/10, despite the fact sales for the 2010/11 fiscal year were about $274 million higher than the previous year.

Tesco reported a loss of $208 million, on sales of about $305 million, for Fresh & Easy in fiscal 2008/09, which was the first full-year of operations for the U.S. chain. There were 115 Fresh & Easy stores open at the fiscal 2008/09 year-end.

Fresh & Easy's loss was lower in 2008/09 ($208 million) than it was in 2009/10 ($253 million), even though revenue was $305 million in 2008/09, compared to $544 million in fiscal 2009/10. Not a good sign, as we pointed out in our analysis at the time.

On October 5, 2011, Tesco reported a half-year loss of $112 million, on sales of $470 million, for Fresh & Easy. Tesco touted the fact the half-year loss was 21-23% less than the $151 million half-year loss from the previous year. However, as we noted above, about $55 million (half being $27.5 million) of the $300 million loss for fiscal 2010/11 can be attributed to the buyouts of the two suppliers, which is also something Tesco noted in its financial reporting, saying that it explains in part why the loss was so much higher than the previous fiscal year loss.

But Tesco can't have it both ways - touting as positive a 21-23% decrease in the fiscal 2011/12 half-year loss at Fresh & Easy, over the half-year-ago same period, while at the same time using the fact it made the buyouts as an explanation for why the 2010/11 fiscal year loss ($300 million) was so much higher than the $253 million it lost in the previous fiscal year. The supplier buyouts were made in the 2010/11 fiscal year.

Instead, we suggest the fiscal year 2011/12 loss Tesco reports in a couple months for Fresh & Easy should be compared to the $253 million loss it reported for the U.S. chain for fiscal 2009/10, rather than the $300 million last fiscal year, because it's a more realistic and informative comparison.

For example, if the 2011/12 fiscal year loss for Fresh & Easy is $200 million, we will be evaluating it as a $53 million decrease (based on the 2009/10 loss) rather than a $100 million improvement over last fiscal year, because of the one-time buyout of the two suppliers, which Tesco itself said inflated the 2010/11 loss amount. We suggest you do the same if you want to get a better picture of Tesco's progress towards break-even with Fresh & Easy.

You should also compare the fiscal 2011/12 loss and revenue numbers with the annual revenue and loss metrics for the previous fiscal years detailed above.

For example, if Tesco reports sales of $1 billion, with a loss in the $190 million-$230 million range, compare that to its loss of $208 million in fiscal 2008/09, when the sales for the year were just $305 million, along with the 2009/10 metrics. Do the same regardless of the loss amount Tesco reports for Fresh & Easy in a couple months.

The point being that the annual revenue-to-annual loss spread should be decreasing much more than has been the case. As an example, If Tesco doesn't report a loss for fiscal 2011/12 that's at least half (which would be $104 million) of what it reported three fiscal years ago (the $208 million loss in fiscal 2008/09), can it really expect to go from a loss of $200 million or so this year to break-even 12 months from now?

Bottom line: It's going to be a struggle for Tesco to have 300 stores open by the end of February 2013. And it's not going to break-even with Fresh & Easy by then. If we are wrong, we will be the first to say so.

We suspect if Tesco reports a loss in 2013 of  around $130 million or less for fiscal 2012/13 (ends February 2013), it will call that a success. But even getting there is going to be a struggle, in our experience - which includes four-plus years of observing, reporting on and analyzing Tesco's Fresh & Easy closely - and analysis. It's also not break-even, or even close to it.

Related Stories

January 11, 2012: Tesco Reports 19.3% Comparable Sales Growth at Fresh & Easy Neighborhood Market For 6 Week Holiday Period

December 26, 2011: Solid Performance Gives Tesco 'Fresh & Easy' Wiggle Room - But CEO Clarke Shouldn't Sleep Soundly Every Night

December 8, 2011: Tesco Reports 11.9% Q3 Comp Store Sales Gain for Fresh & Easy ... But On Heavy Discounting

November 18, 2011: Fresh & Easy Neighborhood Market Combining Big Seasonal Foods Assortment With Promos and Discounts to Lure Holiday Shoppers

November 10, 2011: Chief Marketing Officer Uwins Out in Top-Level Reshuffling at Tesco's Fresh & Easy Neighborhood Market

October 8, 2010: 'The Insider' - Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

October 10, 2011: Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

October 4, 2010: Tuesday's Tesco Interim Report Offers A Road Map of Sorts For the Future of Fresh & Easy Neighborhood Market

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

March 21, 2011: Fresh & Easy Neighborhood Market Flooding its Northern California Store Neighborhoods With Margin-Busting Store Coupons

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 23, 2011: 'The Insider' - Incoming Tesco CEO Philip Clarke Visits America - And Fresh & Easy Neighborhood Market

December 7, 2010: Tesco Reports Solid Third Quarter Same-Store-Sales Growth For Fresh & Easy Neighborhood Market

October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

October 4, 2010: Tuesday's Tesco Interim Report Offers A Road Map of Sorts For the Future of Fresh & Easy Neighborhood Market

April 20, 2010: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy

April 19, 2010: Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy

April 21, 2009: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA

April 20, 2009: Tesco to Report Full-Year Financials Tomorrow; We Estimate £110-£150 Million Full-Year Loss For Fresh & Easy Neighborhood Market

September 30, 2008: News & Analysis: Tesco Reports Half-Year Financials; Reports Loss For Fresh & Easy USA and Sales Per Square Foot Averages

September 29, 2008: Tesco PLC to Report Interim Financials Tomorrow; Including Guidance on Fresh & Easy Neighborhood Market USA

September 26, 2008: Tesco PLC, Fresh & Easy and the Numbers Game; Will Tesco Release Hard Numbers For Fresh & Easy Next Week? If So, Will They Be Meaningful?

Tesco Reports First Quarter Comparable Sales Growth of 11.1 % For Fresh & Easy Neighborhood Market

The next new Fresh & Easy store Tesco will open is the unit at 32nd and Clement in San Francisco, pictured above. The Fresh & Easy market, Tesco's first in the city, opens June 22.

News/Analysis

United Kingdom-based Tesco plc today offered a sales percentage-focused summary report for the first quarter of its 2011/12 fiscal year, which began February 27, 2011 and ended May 28, 2011, including listing sales growth percentages for its Fresh & Easy Neighborhood Market chain in the Western U.S.

Tesco said overall sales at Fresh & Easy were up 21.9% (31.7% at constant exchange rates) and same-store or comparable-store (called like-for-like sales in the UK) sales at Fresh & Easy Neighborhood Market grew by 11.1% for the quarter.

Comparable-store-sales at Fresh & Easy Neighborhood Market were plus-8.6% in Tesco's fiscal year 2010/11 fourth quarter, which ended February 26, 2011.

Additionally, Tesco reported a 9.4% gain in comparable-store-sales at Fresh & Easy for its 2010/11 fiscal year, over the previous fiscal year (2009/10).

The continued growth in comparable-store-sales is a good trend for Tesco with its Fresh & Easy chain because the metric measures sales at stores open at least one year, which means it doesn't include sales growth from new stores opened during a given quarter.

Tesco had 175 stores open at the May 28 first quarter 2011/12 fiscal year-end.

There were 164 Fresh & Easy fresh food and grocery markets open and operating at the February 26, 2011 end of the 2010/11 fiscal year.

Today's reported 21.9% gain in overall sales for Fresh & Easy Neighborhood Market includes those new stores opened between March and May 28, 2011. All 11 of the new stores were opened from March 2 to the end of April 2011.

Tesco didn't open any new Fresh & Easy units in May 2011.

It plans to open one new Fresh & Easy store this month. That store, the first unit in San Francisco, is set to open June 22.

We broke the news about the store's opening date in this May 10, 2011 story: Breaking Buzz: Fresh & Easy Neighborhood Market Plans to Open First San Francisco Store at 32nd and Clement June 22. Tesco's Fresh & Easy confirmed our reporting 13 days later. See - May 23, 2011: Fresh & Easy Neighborhood Market Confirms Our Reports First Two San Francisco Stores to Open June 22 and August 24, 2011

As we've written about previously, although the comparable-store-sales growth trend at Fresh  Easy is a positive one for Tesco, in our analysis it needs to be noted that part of the reason for the significant growth is due to the retailer's continued use of its 10% -to- 25%-off discount coupons, which Fresh & Easy Neighborhood Market has been distributing on a chronic basis since 2008, with only a break of a couple months in 2009.

For example, Fresh & Easy Neighborhood Market has had one or more of the store coupons, which allow shoppers to take deep-discounts off their total purchases - $5-off-$25, 6-off-$30, $10-off-$50, ect., for example - in distribution essentially at all times during the first quarter of this year, posting the vouchers online and distributing paper coupons each week in its advertising circular, along with sending out special coupon books (particularly in Northern California) that contain even more coupons.

As such, we won't get a "real" comparable-store-sales metric from Tesco for Fresh & Easy until it stops using the discount coupons as a regular part of doing business rather than in a promotional manner, which means far less frequently.

Ask yourself this: What if Walmart, Kroger Co. or Safeway Stores, for example, all had 15% -to- 25% off coupons in distribution nearly everyday during each of its respective first quarters Would you not expect each of those chain's comparable-store-sales to be higher due to the artificial lift provided by the chronic use of the vouchers? Any reasonable person would answer yes.

Using the coupons even as frequently as once or twice per quarter is promotional. Distributing the coupons the way Fresh & Easy does - chronically - is an artificial sales-lifter.

And in Fresh & Easy's case, since it has a whopping negative-38% margin, as reported in February of this year, we suggest Tesco would stop using the coupons so regularly if it was confident it could have the same or even similar comparable-store-sales without them.

Tesco doesn't report actual sales and profit/loss numbers, or margin figures, in its first quarter statements.

However, as you can read about here, the retailer continues to lose a substantial amount of money on Fresh & Easy, despite CEO Philip Clarke's pledge to break-even with the chain of 175 stores located in California, Nevada and Arizona by the end of Tesco plc's 2012/13 fiscal year, which is only 21 months away.

As noted above, Tesco also reported a negative 38% margin for Fresh & Easy for the 2010/11 fiscal year.

Based on our reporting and analysis, we haven't seen any indication at Fresh & Easy that would lead us to believe Tesco's first quarter loss was significantly better on a percentage basis than what it reported in April 2011 for the 2010/11 fiscal year.

Additionally, based on its continued chronic use of the discount coupons - Fresh & Easy eats the full-percentage discount (15%, 25%, ect.) with the coupons, which goes to margin loss - along with pricing and general heavy competition in all its markets, we also doubt there's been a significant improvement in the negative 38% margin at Fresh & Easy Neighborhood Market.

But the first quarter double-digit comparable-store-sales growth is a positive indicator for Fresh & Easy, even though in our analysis it reflects the artificial sales lift provided by the chronic use of the margin-killing store coupons.

Our conservative estimate (and it's just an estimate based on our coverage of the chain) is that about 25%-30% of Fresh & Easy's 11.1% comparable-store-sales growth for the first quarter can be attributed to the chronic use of the coupons, which would mean a more "real" comparable-store-sales growth percentage for the first quarter would be about 8.5%, which is still positive.

But retailers can discount all they want to achieve whatever comparable-store-sales numbers they're after - or hope to get. So 11.1% is what it is, the reported percentage growth achieved for the quarter at Fresh & Easy Neighborhood Market.

But in order to break even with Fresh & Easy, Tesco has to start losing a whole lot less money, pure and simple.

Therefore, among other things, that will require achieving a far better than negative 38% margin, regardless of comparable-store-sales growth numbers.

Tesco CEO Philip Clarke also said today the 11 Fresh & Easy stores in Northern California "have started strongly, with weekly sales per store of $150,000 in their first quarter. We assume he means the $150,000 in average weekly sales is a blended average of all 11 stores, since we know directly of more than one store in the region that isn't doing $150,000 a week in sales.

Sales in the Northern California stores - the first two units opened March 2 and the last batch of stores at the end of April - are being greatly aided by very heavy discounting in the form of the deep-discount store coupons, as we reported in this March 21, 2011 story: Fresh & Easy Neighborhood Market Flooding its Northern California Store Neighborhoods With Margin-Busting Store Coupons. The discount coupon blitz in Northern Caifornia has continued since then to today.

Tesco reported an overall sales increase of 7% for its UK business, which represents nearly 70% of its global sales.

Comparable-store sales (like-for-like) in the UK were flat though at 1.0%. And when non-gasoline sales and the UK's value-added tax are factored in, Tesco's first quarter like-for-like sales were negative, as you can see in the chart at the link below.

You can view Tesco plc's first quarter management statement here. It includes a sales percentage breakdown for all of Tesco's operating divisions in Europe and Asia, as well as at home in the UK, and its Fresh & Easy chain in the U.S.

Related Stories

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

March 21, 2011: Fresh & Easy Neighborhood Market Flooding its Northern California Store Neighborhoods With Margin-Busting Store Coupons

December 7, 2010: Tesco Reports Solid Third Quarter Same-Store-Sales Growth For Fresh & Easy Neighborhood Market

October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

October 4, 2010: Tuesday's Tesco Interim Report Offers A Road Map of Sorts For the Future of Fresh & Easy Neighborhood Market

April 20, 2010: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy

April 19, 2010: Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy

April 21, 2009: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA

April 20, 2009: Tesco to Report Full-Year Financials Tomorrow; We Estimate £110-£150 Million Full-Year Loss For Fresh & Easy Neighborhood Market

September 30, 2008: News & Analysis: Tesco Reports Half-Year Financials; Reports Loss For Fresh & Easy USA and Sales Per Square Foot Averages

September 29, 2008: Tesco PLC to Report Interim Financials Tomorrow; Including Guidance on Fresh & Easy Neighborhood Market USA

September 26, 2008: Tesco PLC, Fresh & Easy and the Numbers Game; Will Tesco Release Hard Numbers For Fresh & Easy Next Week? If So, Will They Be Meaningful?

Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

News/Analysis

United Kingdom-based Tesco today reported its biggest yet one-year loss for its 172-store U.S. Fresh & Easy Neighborhood Market chain, which has now been operating in California, Nevada and Arizona for 3.5 years. The first Fresh & Easy stores opened in November 2007.

Fresh & Easy Neighborhood Market lost a whopping $307 million in Tesco's 2010/11 fiscal year, despite sales of $818 million, which is a 42% year-over-year gain in revenue from fiscal year 2009/10. Tesco's 2010/11 fiscal year ended February 26, 2011.

The $307 million loss for the year - which is $54 million more than Fresh & Easy's $253 million fiscal year 2001/10 loss - also came despite a healthy 9.4% year-over-year increase in comparable store (stores open more than a year) sales.

In this piece yesterday - April 18, 2011: Tesco Reports FY 2010/11 Sales & Profits Tomorrow - More Red Ink at Fresh & Easy Neighborhood Market - we detailed what is a very disturbing three-year trend for Tesco's Fresh & Easy, which is this: As the chain's annual revenue grows, so do its annual losses.

This trend is significant because Tesco's strategy for Fresh & Easy is the exact opposite - it's been saying since 2008 that as it grows annual revenues, efficiencies will be created and losses will decrease. But the facts (or trend-line) to date speak for themselves (as you will read in the story linked above) - Fresh & Easy lost $54 million more this year than last year, despite a healthy 42% growth in revenue and a solid 9.4% increase in comparable store sales.

Additionally, Fresh & Easy also lost more money in its 2009/10 fiscal year than it did in its 2008/09 fiscal year, as yesterday's piece shows.

Tesco had 50 Fresh & Easy stores open at the end of its 2008/09 fiscal year, which ended in February 2009. There were 145 Fresh & Easy units open and operating at the end of the 2010/11 fiscal year, which ended in February 2010. And at the February 26, 2011 end of Tesco's 2010/11 fiscal year, the retailer had 164 Fresh & Easy markets open.

There are currently 172 Fresh & Easy stores open and operating - 123 units in California, 28 stores in Arizona and 21 units in Nevada. Three new stores are set to open April 27, all in Northern California.

Tesco essentially offered a version of this same strategy today, saying those efficiencies will soon kick-in, and the losses will shrink, despite the fact the 2010/11 fiscal year loss is considerably higher than last year's loss - despite the 42% increase in revenue over the previous year.

Today Tesco said in a statement that's more spin than substance: "We expect losses [at Fresh & Easy] to reduce sharply in the current year as strong growth in like-for-like (the British term for comparable or same-store sales) sales continues and improved store operating ratios start to deliver individual shop-door profitability. Despite the higher losses in 2010/11, the overall business remains on-track to break-even towards the end of the 2012/13 financial year."

Clarke, who's visited Fresh & Easy headquarters and some of stores at least two different times since February of this year, as we've previously reported, also offered a vote of confidence for Tesco's El Segundo, California-based fresh food and grocery chain today, saying: "I've spent a lot of time with the Fresh & Easy team, and I remain confident that break-even toward the end of fiscal 2012/2013 remains a realistic objective."

Tesco also said today Fresh & Easy will break-even at 300 stores rather than 400 units, which was the number of stores Tesco said in October 2010 it needed to have open by 2013 in order to break even with Fresh & Easy Neighborhood Market. [See - October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

From a break-even standpoint in the retail grocery business, a 100 store difference, in terms of sales volume and other metrics, is a big deal. As such, changing from the 400 units to 300 stores in a six month period (from October 2010 to today) is extremely fuzzy math, in our experience and analysis. Either someone was very wrong in October - or that same someone is very wrong today. One hundred stores is just too much of a variation when it comes to such projections.

As part of 300 unit from 400 stores to break-even revision, Clarke said today Tesco will accelerate this year's new store opening pace, opening about 50 units.

Tesco has never previously said how many new Fresh & Easy stores it planned to open this year. However, based on information from sources, we reported in this piece last year that it planned to open 40-50 units this year. It appears we were right on, as about 40 units was the high-end of the old plan, and the 50 stores Clarke said today (the revision) will be opened this year is the new high-end. So far the grocer has opened 18 Fresh & Easy stores in 2011.

In our analysis though, Fresh & Easy's key problems can't be fixed by merely having 300 - or 400 - stores opened by 2013, as compared to the current 172 units. Why? The chain's problems are more fundamental than they are quantitative, as in store-count. (We will be offering more in-depth analysis on the issue in an upcoming piece.)

Tesco first said on October 5, 2010 it would break-even with Fresh & Easy Neighborhood Market by the end of its 2012/13 fiscal year, which ends in February 2013. That's $307-million-(loss)-to zero in 22 months, despite the fact Fresh & Easy lost $54 million more this year than last.

We'll  have additional reporting and analysis of Tesco's fiscal year 2010/11 starting tomorrow. Stay tuned.

Readers: You can view Tesco's fiscal year 2010/11 financial results here. Tesco plc reported record group profits for the fiscal year, despite the big loss for Fresh & Easy Neighborhood Market.