Philip Clarke, CEO of global retail giant Tesco, has today claimed that his company‘s loss-making US operation Fresh & Easy could break even as early as this year.
In an interview with the Financial Times (FT), Clarke said that eliminating losses at the grocery business is near at hand but that profitability must be the target.
Previous CEO of Tesco Sir Terry Leahy had originally set a target of February 2013 for Fresh & Easy to break even, after costing a reported £1 billion worth of capital since its inception in 2007, but Clarke is now feeling more positive about the operation.
Clarke said to the FT: “I can see it‘s going to get through to break even. What I am yearning for is a day I can say not just, ‘hey do you know what, it‘s got to break even‘ but ‘look here at the prospect of strong returns‘.”
“On the one hand, not losing money is a good thing, but, on the other hand, generating strong returns from the business would be a great moment, and that is where we are starting to focus our efforts now, because that is the new great question.
“The only reason for having any business is that it generates a return… on investment that justifies you being there. So, first job: break even. Second job: returns.”
Many analysts and industry commentators have questioned whether Fresh & Easy would ever make a profit having struggled to establish itself as a new player in the biggest grocery market in the world.
Last summer Tesco announced that it was extending its Clubcard offer to its US business, and Clarke has been looking to open more convenience style stores and reduce the number of large outlets to re-energise the business.
It has been suggested that Clarke will also announce a slow-down in large store expansion in the UK shortly, despite plans to increase staff numbers by 20,000 in the next two years, and look to dedicate less selling space to non-food items.
Clarke said however that big store were “not dead”, and that “they are not beached whales.”
