Well-known supermarket chain Tesco controversially closed its US operations early this year, citing sluggish sales and missed targets. The supermarket operator, which expanded into the US with a network of Fresh and Easy stores, claims that the failed international expansion cost the company over £1 billion in total expenditures.
The US-based stores, which announced their impending closure in April, were the subject of controversial press coverage due to the million-pound bonuses paid to many executives. The stores were a major commercial flop, failing to meet targets due to intense competition in the United States metro markets where they opened.
Tesco chief executive Philip Clarke recently announced the full extent of the losses caused by the company’s failed US business efforts. Tesco spent over £1 billion for the United States expansion project, including the cost of closing down its stores in the country. The decision resulted in a large drop in profits for the company.
With its US operations failing, Tesco also faces a dwindling market at home. After a positive performance last year, with sales increasing during the Christmas period to deliver a three-year high, Tesco’s sales are expected to decline one percent in the UK as consumers reduce their spending on non-food products.
The supermarket chain also faces issues abroad. South Korea, Tesco’s largest Asian market, has introduced trading laws that reduce supermarkets’ ability to operate in the weekend. The change in laws is expected to reduce Tesco’s weekend income.
From its domestic demand troubles to its failed American expansion, Tesco’s recent issues have cost the company much of its confidence. This has been worsened by the recent scandal regarding the company’s inclusion of ‘Clubcard points’ sales in charts aimed at investors, which fail to include their cost to the company.
