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LONDON – Tesco plc is having difficulty finding a buyer for its Fresh & Easy chain in the United States, and may have to break up or simply close the business entirely, according to a Financial Times report.
Although the U.K.-based retailer was reportedly in talks with holding company The Yucaipa Cos. LLC, those talks stalled due to Tesco's desire for a clean break that avoids retaining liabilities for Fresh & Easy, insiders said.
"The prolonged timescale is a cause for concern," said Clive Black, analyst for Shore Capital. He noted that Tesco is still incurring trading losses from Fresh & Easy, although they are treated as discontinued operations. This may also cause higher cash costs due to terminating leases, selling its manufacturing facility and redundancy payments.
However, other industry insiders noted that Tesco never expected to receive a significant amount for Fresh & Easy and has already made a significant write-down, as much as $1.525 billion.
While Tesco CEO Philip Clarke predicted in 2012 that Fresh & Easy could break even during its 2013-2014 calendar year, Tesco's first drop in profits in 20 years contributed to its decision to exit the U.S.