CHESHUNT, U.K. — Tesco PLC here said Tuesday that losses at its Fresh & Easy banner in the U.S. increased to about $302.6 million in the most recent fiscal year, but the company is ramping up expansion and expects to be profitable within about two years.
The chain posted sales of about $816 million in the year, up 41.8%, and same-stores sales were up 9.4% for the year, including 9.8% in the third quarter and 8.6% in the fourth quarter, which ended Feb. 26. Tesco cited the integration of two suppliers in California — 2 Sisters and Wild Rocket Foods — in reporting the loss, as well as exchange rate movements.
"We expect losses to reduce sharply in the current year as strong growth in like-for-like sales continues and improved store operating ratios start to deliver individual shop-door profitability," the company said in a prepared statement. "Despite the higher losses in 2010/11, the overall business remains on-track to break-even towards the end of the 2012/13 financial year."
The company said it would accelerate new-store openings to about 50 in the current year, and said it expected to break even at around the 300-store mark, rather than the 400 it previously anticipated.
"I've spent a lot of time with the Fresh & Easy team, and I remain confident that break-even toward the end of fiscal 2012/2013 remains a realistic objective," said Phillip Clarke, the newly installed chief executive officer of Tesco, in a conference call with analysts Tuesday.
Fresh & Easy operated 164 stores at the end of the most recent fiscal year, compared with 145 a year earlier. It currently operates 172 units, with three more scheduled to open next week.