UK supermarket group Tesco plc (LSE:TSCO) is to exit from the United States, the company announced today.
The Fresh & Easy venture was launched in Nevada, California and Arizona in 2007 but has consistently made a loss in recent years and Tesco started a strategic review of the business in December 2012. The company has now written down the assets of its US business and booked a provision for ongoing liabilities. The total impact to profit after tax is GBP1.2bn, including a GBP1bn writedown on assets and GBP169m of trading losses in the last year.
Chief executive Philip Clarke told the BBC that the plans to withdraw from the US were “well-advanced” and there was interest from potential buyers for all or parts of the business. The sale process is anticipated to be concluded in about three months’ time.
Tesco has also exited from its Japan operations as of the start of 2013 and said today that it is taking “a more measured approach to our growth in China.”
Meanwhile, in its home market Tesco has recorded a property write-down of GBP804m after a review of its UK property portfolio identified more than 100 sites that the company no longer plans to develop. Most of these sites were purchased during the property boom between five and ten years ago.
Overall, Tesco reported pre-tax profit of GBP1.96bn for the 52 weeks to 23 February 2013, down 51.5% year-on-year. Including the US writedown Tesco made a profit of just GBP120m after tax, compared to GBP2.8bn last year. The company has maintained its full-year dividend at GBP0.1476 per share.
Group sales for the year rose 1.3% to GBP72.36bn. In the UK market total sales grew 1.8% to just over GBP48bn, although UK trading profit declined by 8.3% to GBP2.27bn after a significant investment in improving the business.
UK sales excluding fuel and VAT for the fourth quarter of the financial year rose just 0.5%, a slowdown from growth of 1.8% in the six weeks to 5 January, when the company saw strong Christmas trading.