Britain's biggest retailer, Tesco, wrote down the value of its global operations by $3.5 billion and announced plans to exit the United States, as it sought to rebuild after a year in which profit fell for the first time in two decades.
The group, the world's third largest retailer after Walmart and Carrefour, said on Wednesday abandoning loss-making Fresh & Easy in the U.S. would mean restructuring and other one-off costs of 1 billion pounds ($1.5 billion).
Tesco also wrote down the value of its property in Britain by 804 million pounds, reflecting a decision not to develop more than 100 sites, and its businesses in Poland, the Czech Republic and Turkey by 495 million pounds, to account for a sharp slowdown in demand.
Though Chief Executive Philip Clarke hailed Tesco's fourth quarter performance in its home market as its best quarterly outcome in three years, it still represented a slowdown in growth since Christmas, despite a year of huge investment.
"I've been working for Tesco for nearly 40 years and I can tell you this -- it already looks, feels and acts like a different and a better business," Clarke told reporters.
"We've closed the gap in the [U.K.] market, at times we've outperformed it," he said.
Shares in Tesco, up 24 percent over the last three months, were down 3 percent at 1004 GMT, valuing the business at 30 billion pounds.
"Management cannot claim concrete evidence of a U.K. recovery with these numbers," said Panmure Gordon analyst Philip Dorgan.
"It will take time -- retail is detail -- but we believe that Tesco is on track and we expect recovery in the U.K. to slowly emerge in FY2014," he said, adding that Tesco could commence share buybacks in 2015.
Tesco made a statutory pretax profit of 1.96 billion pounds in the year to Feb. 13, down 51.5 percent. It also reported an expected 14.5 percent fall in underlying full-year profit to 3.55 billion pounds, largely reflecting the cost of a 1 billion pounds turnaround plan for its home market, launched after a shock profit warning in January last year.
Earnings were also hit by the impact of the euro zone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and the Fresh & Easy losses.
Fourth quarter sales at British stores open over a year, excluding fuel and VAT sales tax, grew 0.5 percent. Though at the top end of analyst forecasts it was worse than growth of 1.8 percent recorded in the six weeks to Jan. 5.
Tesco's fightback plan for Britain, where it makes over 60 percent of revenue and profit, has focused on more staff, refurbished stores, revamped food ranges and price initiatives -- all aimed at reversing years of underinvestment and halting a loss of share to rivals like J Sainsbury and Asda.
The group also said it had increased a provision to cover the possible miss-selling of insurance products at its Tesco Bank to 115 million pounds.
Following the U.S. retrenchment and reassessment of its U.K. property plans, including a scaling back of sale-and-leasebacks, Tesco now expects to deliver mid single digit trading profit growth, a return on capital employed within a range of 12 to 15 percent and dividend growth broadly in line with underlying earnings.
Fresh & Easy, which trades from 199 stores and employs around 5,000, has absorbed more than 1 billion pounds of capital since its 2007 launch when Tesco was run by Clarke's predecessor Terry Leahy but has never turned a profit in a market where it competes with the likes of Trader Joe's and Walmart Stores Inc. (WMT).
"When I became CEO I really did give it all that we had but in the end I'm responsible to investors and I know I can deliver more to them by leaving that I can by staying," said Clarke.
He had put the venture, which contributes just 1 percent of group turnover, under review in December, saying an exit was likely.
Chief Financial Officer Laurie McIlwee said Tesco had received "a lot of interest" in Fresh & Easy, both for the whole business and parcels of stores.
"What we're most interested in is those buyers that are interested in buying the complete business," he said, noting that a clean sale would remove redundancy and onerous leasehold issues.
He said Tesco wouldn't conclude the process for at least another three months.
Our Favorite Hungry Thieves
Tesco Prepares to Exit U.S. With Sale of Fresh & Easy
It seems that in one corner of Germany, it just isn't safe to transport food in trucks anymore. In the small town of Bad Hersfeld, northeast of Frankfurt, thieves are running off with literally truckloads of goods. In August, 34,000 cans of Red Bull were robbed off a truck; in March, 30,000 euros ($40,000) worth of coffee; and this month, five tons of Nutella. That's 16,000 euros ($20,800) worth of chocolaty hazelnut goodness. It seems unlikely that a sweet tooth was the motive for that latest crime, but rather the odds of being able to move the spread easily and profitably on the black market. A large jar of Nutella can cost upwards of $6.50, even at discount retailers like Walmart (WMT).
An Orlando, Fla., man should have studied the work of his German counterparts better before he decided to hijack a trailer full of Campbell's soup this month. Investigators are unsure of the motives behind the crime -- Black market sales? A terrible cold? -- but after a 30-mile chase that involved a helicopter and K-9 law-enforcement unit, he was caught and the $75,000 worth of canned soup was safely retrieved.
"The court has seen many things stolen ... This is the first time the court's ever seen $75,000 worth of soup stolen," Broward County Judge Jay Hurley told the 51-year-old at his arraignment.
Canadians are known for their love of maple syrup, and Quebec has been called the "Saudi Arabia of syrup." So perhaps it's only natural that someone might view it as a liquid asset. Last August, the Federation of Quebec Maple Syrup Producers discovered something strange in their stockpile. Someone had snuck off with $30 million worth of pure syrup, leaving behind barrels filled instead with water. There was panic. If that much syrup was released onto the black market, prices would be driven down and producers would suffer. Fortunately for breakfasts everywhere, in December, Canadian authorities raided a facility in New Brunswick and recovered most of the stolen goods.
In February, as a Krispy Kreme driver was making a delivery to a gas station convenience store in Dacula, Ga., a man police later identified as James Freddy Major jumped into the truck and took off, giving those on the road that night the once-in-a-lifetime opportunity to see a convoy of police cars in hot pursuit of a doughnut truck.
After running a couple of lights, Major rammed into a mailbox, then attempted to escape on foot. He was tackled by a police dog and eventually arrested. It was, according to media reports, his 11th arrest in Gwinnett County since 1999.
A man from Illinois used fake paperwork to trick a Wisconsin cheese producer into loading $200,000 worth of Muenster on to his truck. He was arrested in New Jersey and the cheese recovered. However, the company, K&K Cheese, doesn't want its 42,000 pounds of cheese back because of concerns that it may have been tampered with. Instead, they will donate it to charity, if it gets cleared by the New Jersey health inspectors.
Maybe this thief didn't get the memo that the cheese bandit had been caught: He ran off with $100,000 worth of hamburger patties this month. The aspiring hamburglar struck at the shipping yard in New Jersey, rolling of with a shipment of burgers originally destined for The Netherlands. A spokesperson for the Linden Police Department said that food crimes like these occur frequently, and if the loot is not recovered within 48 hours, it has probably already made its way onto the black market.
Not every grocery-related theft involves edible items. Supermarkets, discounters and other retailers have all been victims of unusual crime trend recently: People stealing Tide laundry detergent. And it's no small matter: Some stores across the country are losing $10,000 to $15,000 worth of detergent a month.
After a series of such thefts were reported to them, police in Maryland started to get suspicious; it seemed like a more complicated matter than just random petty thefts. Turns out, all those shoplifters weren't just eager to wash their clothes; they were trading the Tide for drugs. Laundry detergent has become a popular item to barter for illegal drugs or sell to black market operations, because it's impossible to track, doesn't spoil, and everyone needs it. Tide, which is the nation's most popular detergent brand, is also significantly more expensive than most other detergents. Like the maple syrup we mentioned before, Tide, too, has earned the nickname “liquid gold" for its value as street currency.