It was not long into my business career in the 1970’s when there was the Midland Banks disastrous foray into the US financial market place. Since then many ‘household’ names such as Marks & Spencer and Sainsbury’s have all ‘set their sights’ on the US as their next really major expansion plan, only to eventually exit the market at a significant financial cost. Personally I have witnessed a major European welding manufacturer try and enter the US market place only to exit 18 months later ‘licking its wounds’ having encountered any amount of state protectionism.
Tesco’s US venture under the leadership of the much respected Sir Terry Leahy started in 2007 under the ‘Fresh & Easy’ chain, with the main presence being in California and Arizona with an investment cost of £1billion. The timing was unfortunate in that it coincided with the subprime crises in the US. It then found itself up against Californian law over its ban on alcohol sales from self-service stores and then the company had to cope with various trade union disputes.
In short, it has been a near disaster venture for Tesco’s. In March Alex Ralph writing in The Times reported that the US accounts for the six weeks to 5th January 2013 revealed a loss of £74million.
Retail analysts in the US are now anticipating that Tesco will try and exit the US with a trade sale with possibly Wal-Mart or Aldi being in the frame. In his article in the Daily Telegraph on 8th April, Graham Ruddick wrote that Tesco “is facing a bill of about £1billion to quit its loss-making Fresh & Easy business in the US.”
For those in business who do not necessarily share my own view, surely they must be asking the question of “If Tesco’s, with all their
might and advisors, can not succeed… who can?”
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