Tesco takes it ‘easy’, controlling costs in its US operations

You may already know about Tesco’s overseas expansion strategy, and its Fresh & Easy venture in the States. The US expansion is taking place in challenging economic conditions and according to The Guardian, the business is ‘mothballing’ a second wave of Fresh & Easy stores, suggesting that the supermarket group’s loss-making US start-up has hit another bump in the road.

It doesn’t look as though Tesco is taking a different strategic approach – just trying to keep fixed costs under control. The chain is “temporarily” shutting a dozen stores across three states, including branches in Las Vegas, Nevada and Phoenix, Arizona. In 2010 it boarded up 13 stores in Nevada and Arizona because of the severity of the US property crash but expansion has since resumed, with 25 stores set to open in the coming months.

Perhaps these temporary closures could be viewed like the temporary closure of car plants in the depths of the recession, as firms scrambled to cut costs, and capacity.

The Guardian quotes a spokesman for Fresh & Easy who said:

“At this time, there is simply not enough growth in sales and customers at these stores to keep them open. We will close these stores over the coming weeks and we will reopen them when economic and business conditions warrant.” He added: “For every store we’re closing temporarily, we are opening two.”

Analysts think that the closures will improve the overall performance of the chain, which are expected to make a loss of at least £125m this year. This drags down Tesco’s overall profitability. Over four years, Fresh & Easy have accumulated losses expected to reach £700m on capital expenditure of more than £1bn – but Tesco have set a goal of break-even in the financial year 2012-13.