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Fresh & Easy in Crosshairs of Investors

EL SEGUNDO, Calif. — Fresh & Easy Neighborhood Market here said Tuesday it is in a closed period — pending release of year-end results next Tuesday — and consequently cannot comment on published reports that the challenges of parent company Tesco in the U.K. could affect its longevity in the U.S.

However, the company did issue a statement — citing remarks it issued earlier this year — that said, “We have a clear target for break even, and in January we reported we have continued our strong run of form.”

Tesco reported its first earnings warning in two decades in January — saying it had seen “more strain than anticipated on our profitability” and forecasting “trading profit growth to be around the low end of the consensus range” — which reportedly has prompted calls from some shareholders to pull back from its U.S. operations.

One of Tesco's largest shareholders said Sunday the company needs to “think long and hard about what it wants to be — can it be everything to everyone, or should it focus on its gem, the British grocery business? Of course, this is likely to raise questions about other areas of the business, such as America.”

When Tesco released first-half results in January, it said U.S. sales were up 40.6% and same-store sales were up 19.3%, though it did not indicate specific dollar amounts.

Tesco said in late 2011 it was on target to reach break-even levels in the U.S. by the end of its fiscal year in February 2013. Fresh & Easy said in January it planned to close 12 underperforming stores temporarily to achieve profitability within that timeframe.

The company operates 196 stores, including 151 in California, 24 in Arizona and 21 in Nevada.


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