Tesco is to temporarily close 12 of its Fresh & Easy stores in the US in the face of harsh of economic conditions.
The fledgling US business failed to gain enough trade at locations in California, Arizona and Nevada, according to the Financial Times.
The stores will be closed until the economy shows signs of sustained recovery. The retailer closed 13 stores, mainly in Nevada and Arizona, in late 2010 due to lack of custom.
Tesco plans to open 25 Fresh & Easy stores in more affluent coastal Californian locations by the end of February including some Express format stores, the first of which opened at the end of 2011.
A spokesman for Tesco said: “There is simply not enough growth in sales and customers at these stores to keep them open.”
Tesco will close the stores “in the coming weeks” and re-open them “when economic and business conditions warrant”. It has set a target for the US chain to break even by February 2013.
Fresh & Easy chief executive Tim Mason has revamped stores and introduced a version of its Clubcard scheme in the US – the Friends of Fresh & Easy card.
Shore Capital analyst Clive Black said Fresh & Easy has been a “reasonably sustained drag on Tesco’s earnings” and expects accumulated losses to February 2012 to be around £700m on capital expenditure of £1bn.
Black said: “In taking decisive action on the underperforming units, the chances of profitability in 2012/13 may have marginally increased to our minds.”
Tesco is due to update on trading at the group in the last six weeks tomorrow.