Tesco’s retreat from US expected imminently

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.

13 thoughts on “Tesco’s retreat from US expected imminently”

  1. Pavlaki says:

    I have just returned from Greece where the situation is as bad as ever. The decline is slowing but most Greeks I spoke to expect it to slow and flatline but not improve thereafter. The government is declaring a primary surplus and using the money to buy votes (with full cooperation of the EU!) ahead of the upcoming euro elections. By any normal accounting practice there is no surplus but rules are being bent to achieve it. There is a real feeling of anger against the political classes and the EU and I do wonder where this will lead in time. Not one person I spoke to can see a way out of the mess and neither do they believe that politicians have any answers. Default and start again was the most popular scenario. It certainly gave me the impression that the cracks or gaping chasms in the Eurozone have only been papered over and that it may well be political upheaval rather than a fiscal event that opens them up again. The Eurozone is not working as it should – as you have just highlighted.

    1. Anonymous says:

      Hi Pavlaki and thanks for the update.

      I did look at the Greek GDP numbers earlier and it is a story of the headline looking relatively good but hiding a tale of woe. If we start with the headline

      “in the 1st quarter of 2014, the Gross Domestic Product (GDP) in volume terms , decreased by 1.1% in comparison with the 1st
      quarter of 2013.”

      So the fall appears to be slowing but for an indebted nation like Greece inflation nominal GDP matters too and it fell by 3.5%. Meaning we have true deflation with both output and prices falling.

      But if we go back as far as today’s data will allow and look at the first quarter of 2005 GDP was 17.5% higher than the quarter just gone. Simply horrible…..

  2. Forbin says:

    Hello Shaun,

    So what do the Germans think ? like the Danes ?

    if this 2 speed Europe continues then you are correct – there will be an implosion

    I am actually amazed they’ve kept the whole thing on T’rack for this long , I guess taking lead out petrol really did help cut crime ….. ( so where did the Bankers get their dose ? 😉 )

    Perhaps the ECB needs to be renamed the European Bundes Bank …

    Forbin

    1. Anonymous says:

      Hi Forbin

      In London these days there is a lot of debate about the particulates from diesel engines I wonder if there will be a similar effects! Except of course the other way around and something which government policy pushed and I am involved as I switched to a diesel. I think I will switch back when my Astra (which is fine but aging) gives up the ghost.

      Today has been a good day for popcorn as corn futures have fallen to US $4.84….

  3. therrawbuzzin says:

    Isn’t it a fact that in any single economic body, especially bigger ones, economic and fiscal policy is always going to suit one area more than another?
    London races ahead whilst the rest of the UK stutters and stumbles forward, for example.
    However, the central authorities in the UK realise (even if unwillingly) that other areas require fiscal transfer, as they are being disadvantaged.
    Germany has to realise that its economy benefits no end from a € which makes its goods far more competitive than if Germany had its own currency.
    Germany has to realise that ECB policy requires that it subsidise those who are disadvantaged by that policy.
    If not, there will be bloodshed, sooner or later.
    German economic imperialism is even uglier than that of the US.

    1. Anonymous says:

      Hi therrawbuzzin

      in essence you are describing regional policy as every currency union has stronger and weaker areas. The issue that the Euro has is that such policies are easier in political and fiscal unions where the population considers itself to be one country. Even then it rarely gets enough support to be large enough and frankly it getting enough support in the Euro seems implausible right now.

      So if we look at it in football terms for all the media talk of Germany losing out it is in fact winning…..

  4. Paul C says:

    Hi Just a thought,

    What does that mean in practice? Are we talking when a bank defaults, creditors lose a proportion of their cash in the deposit account, or perhaps shareholders lose a part of their investment in the bank? Or even that all UK taxpayers enjoy a one-off fine to bail out the folk owed money by the bank that fails?

    I can believe what you say, that manouvers are underway to ensure that everybody shares the pain of bank default and the politician’s and bankers are no “unfairly” held to account in such an event.

  5. Anonymous says:

    Hi just a thought

    I fear too what will happen in the likely event we see another dip in the various economies. The interest-rate weapon can only go negative (unless the silly ideas of a ~0.1% cut come to pass) and extraordinary monetary policies have been unveiled on a large scale too. I am not sure I believe most of the rumours about what Belgium has been doing in the US Treasury Bond market but it is symptomatic of the times.

    So if we sink again then the tactics you describe will become attractive to those in power. The Euro area is nearer to it than the UK but some of the difference is an illusion due to our housing market bubble.

  6. just a thought says:

    Hi Paul,

    My understanding of the above extract is: Some 30% of anyone net “wealth” value (Bank accounts, shares, “pension pots”, housing etc… ) will be generously offer to the state remember that:” Cameron was talking on Sky News and in the recent UK Budget, again it was quietly put in there, almost in the p.p.s, (Power point) down the bottom in the small print, they basically brought in new powers whereby HM Revenue can actually go in and raid people’s bank accounts, on the basis that they may not have paid taxes but the authorities do not have to prove it. So it is simply the word of the Revenue versus the individual and
    they don’t have to have any proof whatsoever.”

    So has the housing “boom” in UK (increasing value) is at full swing…Please, do not worry for the 0.1% their “monies “are well preserved…. Reset?? Anyone??

  7. Forbin says:

    if we do have bank bail ins then it will really be a one off event

    there better be military rule afterwards as I suspect the banks will be closed and monies past out peicemeal

    because everyone and their dog will withdraw their money and never trust the banks again !

    why do you think so many old people kept cash in matresses or old jars ?

    If europe does it and we dont then the anti euro campaign will have won , lock stock and barrel

    did any one tell the Germans ?

    Forbin

  8. Anonymous says:

    Hi Forbin

    I am reminded of JW’s comment from yesterday which enquired how far we have to be pushed these days for a revolution to start.

  9. just a thought says:

    Well Shaun,

    Belgium buying some $200 Billion FED treasury is simply ludicrous…My guess is as valid as yours who could be buying through Belgium??? Saudi Arabia or the Fed itself??? Nothing would surprise me when I read that the American Department of Agriculture is buying unknown amount of submachine guns and high-capacity magazines

    https://www.fbo.gov/index?s=opportunity&mode=form&id=9fc3a01217d03b0354e1e18b69aa7bad&tab=core&_cview=0

  10. Anonymous says:

    The voting circus relieves revolutionary pressure. European voters have only got themselves to blame for continually reelecting the same failing politicians.

    The risk to the establishment is when only extremist parties offer an alternative.

    Down under, the Australians are making efforts to balance their budget and NZ is predicting a surplus. The NZ labour party runs fiscally sound policies – none of the ruinious borrowing repeatedly done by British labour politicians.

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