business news in context, analysis with attitude

• The Financial Times reports that "hopes are fading" that Tesco will be able to sell its US venture, Fresh & Easy Neighborhood Markets, and now the most likely outcome is seen as a "closure or break-up of the California-based operation."

According to the FT story, "Tesco had been thought to be close to a sale of Fresh & Easy to Yucaipa, the investment vehicle of US billionaire Ron Burkle. However, the talks have stalled, several people familiar with the situation said. The sticking point in conversations with buyers has been Tesco’s desire for a clean break from the US. The company wants to avoid it or its shareholders retaining liabilities for Fresh & Easy after an exit.

"The current situation is thought to be fluid, however, and it is possible it could yet change."

Bloomberg reports that Tesco, seeking to "revive its hypermarket business " in the UK, is making some changes with a new prototype in Watford that it will open on August 12 and that it hopes will provide some scalable initiatives.

The Watford store, according to the story, "is a test site to see how customers respond to new ideas ... Fresh produce and delicatessen counters are front of store while gourmet coffee as well as tapas are on sale from upmarket chain Harris & Hoole and the Giraffe restaurant. A former bay for shopping carts is now an outdoor eating area. Local children’s playgroups, back-to-work programs, yoga and Zumba dance groups are being offered surplus space in the store for free."

Tony Hoggett, managing director of Tesco's Extra chain of 250 stores, says that the challenge is to make the hypermarkets “exciting, relevant and convenient."

Reuters reports that Tesco "will slash its China exposure by taking just 20 percent of a new venture with a state-run company, a deal that underlines the travails foreign retailers have had in the Chinese market and allows the British retailer to focus on turning around its domestic business."

The story says that Tesco will "team up with China Resources Enterprise Ltd, ceding control but bringing their combined market share close to market leader Sun Art Retail Group Ltd ... The joint venture would create a business with some 10 billion pounds ($15.6 billion) in sales. Last year, Tesco's China operations generated sales of 1.43 billion pounds ($2.2 billion). CRE's Vanguard unit operates 2,986 stores, mainly hypermarkets or supermarkets, across China and Hong Kong, while Tesco has 131 outlets."
KC's View:
All three stories reflect what is being referred to as Tesco CEO Philip Clarke's more "disciplined" approach to running the business - get out of the stuff that doesn't work, double down on the home front, and find partners to reduce the downside potential in some foreign markets.