9th April 2013
Tesco’s retreat from the US, when it happens, is hardly going to be a surprise. The British supermarket did not – thankfully – bet the house on the venture, just a substantial portion of its cash and little bit of its reputation.
That magic Tesco formula was not repeatable stateside though, of course, Tesco sought a US niche formula with its 200 Fresh & Easy stores mostly in urban centres.
What we await, possibly in the results next week are the details of how Tesco will divest itself perhaps with a sales to Aldi or even to Walmart which wants to create a more metropolitan small store presence itself as FT.com reports.
Analysts suggest that Tesco will have to write down at least £1bn from this year’s expected £3bn profits though that is very obviously factored into the share price and many still rate the stock a buy.
It is a different story to that of Marks & Spencer which left France and some broken-hearted shoppers only to return to their delight a decade later. M&S in France of course continues to be recognisable as M&S and brand awareness is a lot easier to carry over the Channel than over the Atlantic.
Maybe that is in part what went wrong for Tesco, though of course in the US the mainstream supermarket sector was already more than adequately served, and it is not as if the US mass market consumer is much impressed by a British brand name.
It may give investors pause for thought about firms that try to be big over here and in the US, certainly if they are planning to grow just about from scratch in difficult consumer markets.
And while much is made of stocks with a solid British base that also give international exposure, maybe there is something to be said for solid dependable domestically-orientated firms as well especially given the British love unfair with supermarkets. But how long will that satisfy Tesco? Maybe integrating the Giraffe restaurant chain will keep management distracted for a while.