Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy

United Kingdom-based Tesco plc today reported strong overall group revenue and profit for its 2009/10 fiscal year, which ended on February 27, 2010.

However, the global food and general merchandise retailer reported a loss of $253 million, on sales of $544 million, for its Fresh & Easy Neighborhood Market USA fresh foods and grocery chain for the fiscal year.

That's a loss of $45 million more than the $208 million loss Tesco reported for Fresh & Easy in its 2008/09 fiscal year. Fiscal year 2008/09 revenue for Fresh & Easy was $305 million. [Related post - April 19, 2010: Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy]

This higher loss is troubling for Tesco because central to its strategy for Fresh & Easy is the concept that by adding numerous additional stores fairly rapidly, which it did over the last year, and thus increasing its sales volume, it would narrow the amount of money it's losing with Fresh & Easy.

Revenue did increase considerably (as you can see above) from fiscal 2008/09 -to- 2009/10 - primarily because of the numerous (about 30) new Fresh & Easy stores opened during the period, rather than via same-store-sales growth. But rather than decreasing, the fiscal 2009/10 dollar loss amount increased in 2009/10, over 2008/09, as detailed above.

Tesco CEO Terry Leahy said today the retailer expects its fiscal year 2010/11 loss for Fresh & Easy to be about the same as the $253 million for fiscal year 2009. Leahy added he believes the losses for Fresh & Easy have peaked, meaning he doesn't expect the fiscal year 2010 loss to be higher than the $253 million. Tesco's fiscal 2010/11 year began on February 28, 2010.

The CEO also announced today that Tesco plans to open 50 new Fresh & Easy stores in fiscal year 2010/11, which started on February 28 and ends in early 2011.

Tesco: Strong group revenue and profit

Tesco plc's profit for the fiscal year rose to 2.33 billion pounds ($3.58 billion) from 2.13 billion pounds ($3.22 billion) a year earlier.

Fiscal year 2009/10 revenue increased 5.6% to 56.91 billion pounds ($87.5 billion) from 53.9 billion pounds ($82.82 billion) in the prior financial year, which included one extra week.

[Click here for a complete summary of Tesco's fiscal year 2009/10 financials. Click here for an interview with Tesco CEO Terry Leahy, along with a webcast of the financial results.]

Fresh & Easy Buzz will be publishing a detailed analysis piece, focusing on the Fresh & Easy loss and Tesco CEO Terry Leahy's 50% sales increase projection for fiscal year 2010/11, at the end of the week. Stay tuned.

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

Fresh & Easy's parent company, United Kingdom-based Tesco plc, is set to report its fiscal year 2009 sales and profits tomorrow, Tuesday, April 20.

The global retailer will likely report a full-year loss of about $250-$259 million for its Southern California-based Fresh & Easy Neighborhood Market fresh foods and grocery chain.

Tesco offered the $259 million top-end loss estimate for Fresh & Easy months ago.

Offering the loss estimate was a smart move on the part of Tesco since, in our analysis, it serves as a form of inoculation, which we predict will serve to take some sting out of the media reports tomorrow and the days to follow on what is a significant loss at Fresh & Easy.

Fresh & Easy by the numbers

However, if Tesco reports a loss for Fresh & Easy that's much higher than the estimated $259 million - say even $5 million -to- $10 million higher - that will be, in our analysis, very bad news for the global retailing giant.

We don't suspect that to be the case though. Rather, we estimate the global retailer will report a slightly lower number than the estimated $259 million for its Fresh & Easy chain, which will have 159 stores in California, Nevada and Arizona at the end of April.

Either way - slightly more than $259 million or slightly less - right now we don't see much daylight for Tesco in the next year in terms of significantly reducing its losses with Fresh & Easy. Based on the chain's performance to date, we anticipate similar losses for its 2010 fiscal year.

Tesco plc's 2009 fiscal year ended in February 27, 2010.

It reported a loss of $208.05 million for Fresh & Easy in its 2008 fiscal year.

We estimate Tesco has lost at least $700 million so far on Fresh & Easy. Tesco set up shop in the U.S. in 2006. The first Fresh & Easy stores opened in November 2007.

Net positive fiscal 2009 for Tesco

In terms of its overall reporting tomorrow, most financial analysts that follow Tesco plc are expecting positive results.

Consensus estimates by London and Wall Street stock analysts are that it will report a strong, year-over-year (2009 over 2008) sales increase of 9%, and a pre-tax profit rise of just over 6%.

Tesco could also report tomorrow that it has reduced its substantial corporate debt significantly. For the past year the retailer has been selling some of its UK stores and then leasing them back in a program designed to generate capital and reduce debt

Tesco plc, which is the third-largest global retailing chain based on annual gross sales, derives 70% of its profits from its UK stores. It's the leading food and general merchandise retailer in the UK, with a 31% market share.

It's also a major player in the retail banking, insurance and mobile phone sectors in the UK.

Limited reporting data for Fresh & Easy

Don't look for Tesco to report many specifics (key indicators) - such as same-store-sales (like-for-like in the UK) or gross margin - about Fresh & Easy tomorrow - other than the overall total dollar loss amount for the fiscal year.

Fresh & Easy Buzz will be offering some analysis on Tesco and Fresh & Easy after the retailer's reporting on Tuesday. Stay tuned.

Tesco PLC Director and Fresh & Easy USA CEO Tim Mason Sells Over 631,381 Tesco Shares Yesterday For $3.2 Million Payday

Tim Mason (pictured above in front of the "fresh from our kitchen" sampling kiosk in a Fresh & Easy market), the CEO of Tesco's Southern California-based Fresh & Easy Neighborhood Market grocery and fresh foods chain, and who also is a director of United Kingdom-based Tesco PLC, yesterday (Wednesday, April 22) sold 631,381 ordinary shares of Tesco PLC stock at 350. 30 pence each, resulting in a financial gain of £2.2 million (British pounds) -- about $3.2 million U.S. -- according to a regulatory filing financial press release issued today by Tesco PLC. [You can view the release here.]

The British government requires companies like Tesco to make such regulatory filings and issue such regulatory news releases when a company director sells shares.

Tesco PLC and Fresh & Easy Neighborhood Market USA CEO Tim Mason's stock share sale payday today comes just one day after (Tuesday, April 22) the British-based global retail chain reported record full-year sales and profits for Tesco PLC but reported a bigger than hoped for loss of £142 million (British pounds) -- $208.05 million U.S. -- on sales of £208.04 million (British pounds) -- $305.04 million U.S. -- for its Fresh & Easy Neighborhood Market USA grocery and fresh foods chain.

Following its record profit report yesterday, Tesco PLC's stock share price rose on Wednesday, April 22, the day Mr. Mason sold his shares.

[See our Tuesday, April 22, 2009 story here: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA .] for information on Tesco's annual sales and profits for the fiscal year reported on Tuesday.]

Mr. Mason, who now makes his home in Southern California not far from Tesco's Fresh & Easy Neighborhood Market headquarters in El Segundo, was named to Tesco PLC's board in 1995.

He was named CEO of Tesco's then just-forming Fresh & Easy Neighborhood Market USA venture by Tesco PLC CEO Sir Terry Leahy in early 2006. Before that appointment, which he continues to hold, he headed-up Tesco's corporate marketing function at its United Kingdom corporate headquarters.

Tesco established its Fresh & Easy Neighborhood Market office in Southern California not long after Mr. Mason was named CEO in 2006.

The first Fresh & Easy stores opened in Southern California beginning in early November, 2007. The very first Fresh & Easy grocery and fresh foods market opened in Hemet, in Southern California's Inland Empire region not far from the 850,000 square-foot Riverside County Fresh & Easy distribution center, as a soft opening test in late October, 2007.

Tesco as of today operates 119 small-format (10,000 -to- 13,000 square-foot), convenience-oriented Fresh & Easy combination grocery and fresh foods markets in California, Nevada and Arizona. Store number 119 opened today in the Southern California city of Corona.

There are 64 of the Fresh & Easy stores located in California -- 61 in Southern California and three in Bakersfield, which is in the southern Central Valley. The remaining 55 stores are located in the Metropolitan Las Vegas region in southern Nevada (25) and in the Phoenix Metro region in Arizona (30).

Loss or not for Fresh & Easy USA, of which he is the CEO, yesterday was a nice payday for Mr. Mason in his role as a director of Tesco PLC.

He still holds a considerable amount of Tesco PLC stock as a director, despite selling the 600,000-plus shares yesterday.

With Tesco's stock share price rising in the wake of its positive full-year profit performance reported on Tuesday, don't be surprised to see other company directors sell some of their stock, just as Mr. Mason did on Wednesday.

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

United Kingdom-based Tesco PLC, which owns and operates Southern California-based Fresh & Easy Neighborhood Market, today reported record corporate sales of £54.3 billion (British pounds) and record annual gross profits of £3 billion for its 52-week fiscal year ended on February 28, 2009.

Additionally, Tesco reported its net profit in the fiscal year ended February 28, 2009 rose to £2.16 billion (British pounds) ($3.15 billion U.S.) from £2.12 billion a year earlier.

The UK-based global retailer also said today it's new fiscal year, which began on March 1, is looking good thus far, reporting that sales are up 9.2% in the first six weeks. (See the links at the end of this piece for Tesco's detailed reporting.)

Below is what Tesco CEO Terry Leahy said about Tesco PLC's full-year sales and profit performance today:

"At a time when customers everywhere are feeling the economic strain, we are responding to their changing needs in all our markets by lowering prices, introducing more affordable products and offering even sharper promotions. These actions, combined with our core strengths - in selling food and everyday essentials, owning our own property and having a broad business base - are helping us to cope well with the effects of the downturn. We are also pleased with the early performance of Tesco Personal Finance under our ownership and with the converted Homever stores in Korea.

As a result, we have delivered a solid sales and profit performance, both in the UK and internationally, whilst continuing to invest in our long-term strategy for growth. We have made a good start to the new financial year and I am confident Tesco will continue to make good progress even in the current global economic environment."

Tesco reports £142 million loss for Fresh & Easy USA

But despite its excellent overall performance in the UK and globally, Tesco reported a higher than hoped for £142 million (British pounds) -- $208.05 million U.S. at actual exchange rates -- full-year loss for its El Segundo, California-headquartered Fresh & Easy Neighborhood Market small-format (10,000 -to- 13,000 square foot) grocery and fresh foods chain, which currently has 118 stores located in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona. There were 115 Fresh & Easy stortes open at fiscal year-end on February 28, 2009.

The £142 million ($208.05 million U.S.) loss widened from £62 million ($91 million U.S.) a year ago, according to Tesco.

In this story published yesterday [April 20, 2009: Tesco to Report Full-Year Financials Tomorrow; We Estimate £110-£150 Million Full-Year Loss For Fresh & Easy Neighborhood Market USA] Fresh & Easy Buzz estimated Tesco would report a loss today for Fresh & Easy of between £110 -to- £150 million (British pounds). The loss reported today was £142 million (British pounds) -- $208.05 million U.S. -- which is at the upper-range end of our estimate.

Below is what Tesco said today about its full-year Fresh & Easy Neighborhood Market financial performance:

"A segmental report on the United States is included in International in respect of the full year for the first time with these results. US sales and initial trading losses were previously reported within the UK segment. US sales were £208m in the year, including like-for-like growth of 30%, and trading losses were £142m (last year US trading losses were £62m). At constant exchange rates, trading losses were £123m, higher than our guidance provided last year, reflecting the more challenging trading environment in the Western states and our decision not to open stores in Northern California for the time being. Sales overall were lower than anticipated at the time of last year's Preliminary Results, as a consequence of our previously announced decision to maintain, rather than accelerate our rate of new store expansion during the second half given the severity of the economic downturn in some geographic markets in the Western US.

US trading losses reflect the fact that the US business - which has now been trading for 16 months - has been built with the necessary infrastructure in place from the beginning to support hundreds of stores. At this stage, it is therefore operating with high overhead and other costs in relation to the scale of the business, whilst also trading from immature stores."

[See our story here[Tesco to Report Full-Year Financials Tomorrow; We Estimate £110-£150 Million Full-Year Loss For Fresh & Easy Neighborhood Market USA] from yesterday in which we offered (the comments in italics in the piece) a few suggestions as to what Tesco would say publicly today in reporting the loss for Fresh & Easy.]

Fresh & Easy: full-year sales, loss

Fresh & Easy's £142 million (British pounds) -- $208.05 million U.S. -- full-year loss was on reported annual sales of £208 million ($305.04 million U.S.). In other words, Tesco Fresh & Easy's full-year sales of $305.4 million (U.S.) only exceded its full-year operating loss by $97 million (U.S.).

That's a sales-to-profit ratio that paints a rather grim 52-week performance record for Fresh & Easy Neighborhood Market USA.

Tesco did report that same store sales for the 115 Fresh & Easy markets opened at the end of the fiscal year rose by 30% over a year ago. That's a big positive for the grocery and fresh foods chain since as we've previously reported, one of Fresh & Easy's problems has been the fact that many of its existing stores are underperforming. However, there's no way to tell how many of the 115 stores contributed to the 30% same stores sales gain -- it could be the 50 best performing of the 115 stores, for example -- but any increase in same store sales is positive news for Fresh & Easy. It doesn't deal with the underperforming store issue though.

Tesco didn't report any additional data for Fresh & Easy, such as gross margin information, as we said in our piece yesterday would be the case, and as you can see in the chart here (scroll down to the "United States Results" headline at the link. In fact, it includes gross margin as a line item in the graph but puts not available (n/a) under the line item.

Tesco has hoped to reach break even with Fresh & Easy at the end of the current 2009-2010 fiscal year, which began on March 1, 2009. The odds of achieving that target are slim to none, in our analysis.

But Tesco PLC CEO Terry Leahy said today in the conference call announcing the retailer's full-year profit results that in such a severe economic recession "it's pointless" predicting when Fresh & Easy will break even.

"The danger is that in order to rush to break even you'd slow your ability to target long-term expansion," he added in today's conference call.

However, since food and grocery retailing has been one of the few sectors doing well to fairly well in the U.S. in the current recession, and retailers offering a discount format model like Tesco says Fresh & Easy is are doing the best in the sector, we find Tesco's putting the primary if not entire focus of the problems with Fresh & Easy on the economic recession very hard to buy, as we've said previously.

Without a doubt the economic recession is hurting retailers of all types, including grocers. But the fact is that food and grocery retailers like Wal-Mart, Aldi USA and Supervalu, Inc.'s Sav-A-Lot, all discount-oriented sellers of groceries, are doing well in the recession, as shoppers are moving to grocers that offer the most real and perceived value in the economic downturn.

Tesco touts Fresh & Easy as offering food and grocery items at up to 15% cheaper everyday than its competitors in California, Nevada and Arizona. Additionally, the grocer regularly distributes $5-off (purchases of $20 or more) and $6-off (purchases of $30 or more) deep discount store coupons (although it has cut back on these coupons dramatically since February of this year), and beginning in late February has been offering numerous loss-leader, deep-discount priced food and grocery items in its advertising fliers, which it changed to a weekly ad circular in February, from its previous once-every-three-weeks duration.

Therefore, based on this food retailing model -- low everyday prices and super hot promotional prices and the discount coupons -- wouldn't it seem that shoppers struggling with cash in the recession would beat a path to any grocery store that offers such value?

Logic and economics suggests they would.

But they aren't flocking to Fresh & Easy, nor were they before the real effects of the recession were felt in about March 2008. The current recession officially started in December 2007. But until about March 2008 consumer spending was at its previous December 2007 levels. And the full effect of the recession didn't really start being felt until the summer of 2008.

But Tesco PLC CEO and Tesco Fresh & Easy USA CEO Tim Mason have been attributing nearly all of Fresh & Easy's problems to the recession. We certainly think the recession is a contributor -- the Fresh & Easy's problems, and therefore a major contributor to its loss, are much broader than the macro economic influence of the current economic recession.

Stay tuned to Fresh & Easy Buzz for upcoming analysis on Tesco's full-year financial report today, with a particular focus on Fresh & Easy Neigborhood Market USA.

Below are links to Tesco's full reporting:

REG-Tesco PLC Final Results - Part 1

REG-Tesco PLC Final Results - Part 2

REG-Tesco PLC Final Results - Part 3

REG-Tesco PLC Final Results - Part 4

>Additional information, including a video interview with Tesco PLC CEO Terry Leahy, is available on the Tesco PLC corporate Web site here.

[You can follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Tesco to Report Full-Year Financials Tomorrow; We Estimate £110-£150 Million Full-Year Loss For Fresh & Easy Neighborhood Market USA

United Kingdom-based global retailer Tesco PLC, which owns and operates El Segundo, (Southern) California-based Fresh & Easy Neighborhood Market, is set to report its full-year sales and profits tomorrow.

The word on the street in London, Britain's financial capital, is that Tesco will report record annual sales tomorrow.

In terms of its full-year profit, numerous Tesco analysts and watchers are tossing around a figure of £3 billion (British pounds) in profits for Tesco for the year. If Tesco does turn in the £3 billion profit number, or something close, that will be a rather solid performance amidst the current global recession. Tesco doesn't just sell food and groceries globally. It's also a general merchandise, hard goods and soft goods retailer. And as we're all are aware, consumers internationally have cut back significantly on purchases beyond food, grocery and other essentials in the global recession.

Not so Fresh & Easy

Not as positive for Tesco will be announcing its full-year loss for its U.S. small-format, convenience-oriented Fresh & Easy Neighborhood Market chain, which has 118 stores in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona.

Tesco won't go into much detail tomorrow in terms of breaking down performance figures for Fresh & Easy. But it will break down and report a full-year figure, in this case a loss, for its Fresh & Easy operation.

Fresh & Easy Buzz estimates Tesco will report a full-year operating loss for its Southern California-based Fresh & Easy operation of between £110 -to £150 million (British pounds).

Tesco had in the past hoped that its 2009-2010 operating period with Fresh & Easy -- the first stores opened in November, 2007 -- would bring it to the break-even investment point with the enterprise. But the financial powers that be at Tesco in the UK realized many months ago it wasn't going to happen.

Fresh & Easy Buzz will be reporting the Tesco numbers tomorrow, along with offering some in-depth analysis, especially on the Fresh & Easy piece, for our readers.

Below are a statements or assorted verbage we suggest you look for Tesco to say tomorrow when it reports its substantial full-year operating loss for Fresh & Easy:

>The extent of the loss will be primarily attributed to the economic recession in the U.S., with perhaps an added note about how California, Nevada and Arizona, the three states where the Fresh & Easy markets are located, have been among the hardest hot of all U.S. states in the economic downturn.

>Look for a comment about how Tesco's Fresh & Easy has, just beginning earlier this year, put an added emphasis on promotions, special pricing (or as Fresh & Easy CEO Tim Mason said, "getting down and dirty" on promotional pricing), deeper discounts and the like. As a result, Tesco just might say something like this: "having only recently taken this direction -- a direction that we are already seeing bearing fruit -- we see positive signs." Or something very close to this.

>Look for something perhaps like this: "Although we stand completely behind the pre-Fresh & Easy launch research we conducted, we could have done a better job in understanding how mature the U.S. market is. We didn't realize we would have to get as aggressive on pricing and promotions as we are now doing.

Fresh & Easy: Going forward

Fresh & Easy Buzz at present doesn't see a scenario in which Tesco will break even with Fresh & Easy by the end of 2010, unless some significant changes are made. This is despite slowing the new store growth, and hence capital investment, of the Fresh & Easy chain.

When it first launched Fresh & Easy, Tesco was touting that it planned to have at least 200 stores opened and operated by February-March of this year. In mid-2008, the grocer lowered that estimate to having about 150 open by that time instead.

But instead, there are currently 118 of the small-format, combination grocery and fresh foods stores open and operating.

Additionally, those initial plans also called for already having some Fresh & Easy stores opened and operating in Northern California's San Francisco Bay Area by now. Instead, Fresh & Easy has postponed its Northern California launch indefinitely.

Non are open yet, and the grocer has postponed its Northern California launch indefinitely.

Meanwhile, Tesco's Fresh & Easy has, based on our reporting, at least 50 sites -- vacant buildings for remodels or vacant lots for build from the ground up stores -- in various states of condition -- ranging from completed to not yet started -- in Northern California. Those locations are in the San Francisco Bay Area, the Sacramento-Vacaville region and in the Central Valley. Because many of the sites are vacant retail buildings, Tesco's Fresh & Easy has been and is making monthly lease payments on the properties.

The retailer has yet to open any of the eight Fresh & Easy store sites that we are aware it has in Fresno, California in the southern Central Valley. Thus far the grocer has opened three of the nine total sites it has announced it has in the Bakersfield, California Metropolitan region, which is located in the far southern Central Valley.

We don't believe that the rapidity of store openings -- how many and how fast a grocer opens new stores -- is a good measurement of a retailer's performance in general.

But opening numerous stores and opening them fast in multiple markets was one of the hallmarks of Tesco's public relations push in its Fresh & Easy launch, talking about having 1,000 stores operating in 4-5 years and such, for example.

As a result, the retailer should be held accountable for missing the mark so grandly. Frankly the pre-launch PR blitz sounded much like Imperial hubris, in our analysis and opinion. We would hope if it had it to do over, Tesco would be a bot more low key.

In reality, Tesco's planning with Fresh & Easy has been terribly flawed; particularly in the case of its original super-fast store opening-growth and rapid new market entry plan, which has now been scaled down to what looks like only a moderate project for the world's third-largest retailer.

And at times it appears Tesco is flying by the seat of its pants with Fresh & Easy.

For example, we've talked with former employees who worked at Tesco's Fresh & Easy Neighborhood Market corporate headquarters in the Southern California city of El Segundo. The former employees have told us that in 2008 senior management was taking time to conduct an exercise Tesco calls "talent spotting." The purpose of the exercise is to essentially identify current employees who work at headquarters who would be willing to move to a new market region when the company opens its division there.

In and of itself this is a good strategic planning process. But not we think for a grocery chain that was and is struggling significantly in its existing markets. It's difficult enough to take a successful retail food and grocery chain and transplant it to another market, just ask the numerous U.S. retailers who've done so and struggled considerably and even failed in that new market. But to take a seriously challenged format and poor performing chain to a new market is...well, a different animal all together.

But Fresh & Easy seemed determined to do just that in 2008.

The former employees say Tesco Fresh & Easy senior management was talking seriously about soon entering new markets like Chicago and even Florida as part of these "talent spotting" exercises in 2008. They also were held in 2007 before the first stores opened, as part of the chain's strategic planning process, which we think is fine. (We reported in late 2007 and early 2008 that Chicago, Florida and possibly even New York were the top markets on Tesco's new market entry list.)

But the fact that Fresh & Easy was struggling so much, and it still is, in 2008 and Tesco was still thinking seriously about Chicago...well, that's what we mean when we say it often appears things are being done at the top at Tesco's Fresh & Easy using that oxymoronic form of management theory and practice called "strategic management by the seat of the pants.'

Later in 2008 Tesco Fresh & Easy Neighborhood Market CEO Tim Mason said Chicago was no longer on the retailer's near-term (and we doubt even medium-term) new market radar screen.

He also said the retailer wouldn't open its first store in Northern California unless and until it saw some improvement in the economic recession. Mason also said the retailer needs to finish building its Northern California distribution center. (We will have more on the Northern California distribution center in an upcoming story.)

But ironically, while we understand the major reason for postponing the Northern California launch is probably to conserve cash, and keep losses from growing, from an economic recession standpoint Northern California, specifically the San Francisco Bay Area where the first Fresh & Easy stores in the region have been slated to open, is doing far better economically that the rest of California, and much better than Nevada and Arizona.

For example, San Francisco (which is both a city and county) and Marin County to its north both have unemployment rates just slightly over 7%. In contrast, California's overall unemployment rate for March was 11.2%. Other counties in the Bay Area also have jobless rates below the state average of 11.2%.

A number of the areas in Southern California where Tesco has its Fresh & Easy markets, as is the case in Bakersfield, have unemployment rates above the 11.2 state average. And much of Metropolitan Phoenix, Arizona and Metro Las Vegas, Nevada where the Arizona and Nevada Fresh & Easy stores are located, also have unemployment rates above California's 11.2%. Some regions much higher.

Therefore, if the primary cause of Tesco's struggles with Fresh & Easy is the severe recession, as CEO Tim Mason has said, would it not make sense to perhaps rapidly open some stores in Northern California's San Francisco Bay Area area, which is doing relatively well compared to most of the rest of the state, and perhaps even close a few in Metro Las Vegas and Metro Phoenix, since the recession is affecting those states so severely?

We will leave it there for now.

But stay tuned tomorrow, following Tesco plc's full-year financials report, for full analysis on Fresh & Easy Buzz.