Tesco chief executive Philip Clarke told shareholders at last week’s AGM that that the grocer would abandon its loss-making US venture Fresh & Easy if it fails to become profitable.
However, he insisted Fresh & Easy offers great potential and played down the prospect of an exit being necessary.
Clarke said: “Fresh & Easy is improving as a business and I can assure you that it is receiving close attention from the executive team.
“We believe there is great value in the business and, if we get it right, an excellent stream of growth in future years.”
However he acknowledged: “If we see there is no chance of success, we’ll do as we’ve just done in Japan.” Tesco revealed last month that it was selling its Japanese business.
Fresh & Easy, which launched on the west coast of the US in 2007, is estimated to have lost £700m and cost £1bn of capital since it was set up.
The Change to Win Investment Group, which advises US union-sponsored pension funds, asked the grocer to set up a committee of non-executive directors to review Fresh & Easy’s future and create fixed benchmarks to measure its success.
“We will not be doing that,” responded Broadbent.
Tesco has been under pressure from some investors to pull the plug on its US operation. In April, it was reported that investors including Legal & General suggested that Clarke should focus on the core UK grocery market and pull out of the US and its banking operations.
During the meeting one investor put pressure on Clarke to resign if profitability is not improved. “Will you resign if you don’t achieve them [targets] or will we have to vote you out?” he asked.
Tesco chairman Sir Richard Broadbent said Clarke was “evidently one of the best retailers in the world’ and said there was “absolutely no prospect” of him resigning.