Tim Ashdown Named CEO at Tesco's Fresh & Easy

Breaking News ... Plus Analysis

Tim Ashdown, the former CEO of United Kingdom-based Tesco's Asia operations, who's essentially been running Fresh & Easy Neighborhood Market as its chief operating officer since arriving in May of this year, has been named CEO of the El Segundo, California-headquartered chain, replacing Tim Mason who departed Fresh & Easy and Tesco, where he was deputy CEO and chief marketing officer in addition to being CEO at Fresh & Easy, this week as part of Tesco CEO Philip Clarke's decision to exit the U.S. by either selling the 200-store grocery chain as a whole or in pieces, or if that fails, closing its doors.

Ashdown, who is responsible for the various changes (like testing full-service checkout in two stores) and workforce reduction measures at Fresh & Easy over the last eight months, was named CEO yesterday. The announcement was made to employees at Fresh & Easy's corporate office in El Segundo. Tesco's CEO, Philip Clarke, has been in Southern California this week.

Ashdown's key task as CEO, in our analysis, is to keep Fresh & Easy on life support until Clarke and Tesco's board can, the hope, find a buyer for the chain, which opened the doors of its first store in November 2007. That first store, in Hemet, California, has since been closed, along with 23 other Fresh & Easy units , because it failed to come even close to meeting the weekly sales numbers needed to continue in operation.

Tesco, which truth be known has no idea what to do with Fresh & Easy - and hasn't for a number of years -  has hired the Greenhill investment firm to find a buyer for the chain. Failing to do that, Greenhill, which is also the firm trying to find a buyer for Supervalu, Inc., has been charged by Tesco to come up with other alternatives, which include selling the stores and the massive Riverside, California distribution center (and related campus properties) piecemeal.

Greenhill, which actually has been working on the project for some time, is going to have a difficult time of it. For example, only about 20% (30-40 units) of Fresh & Easy's 200-store base are in the black - and not by much. Additionally, many of those money-losing remaining 150-plus stores are bleeding tons of red ink, so much so that Tesco reduced the operating hours of 30-plus stores earlier this year, as we reported exclusively in Fresh & Easy Buzz.

Ask yourself this: Would you buy a grocery chain with only 30-40 of its 200 stores in the black?

Selling the stores piecemeal will be no easy task either. Only a few of the 200 units have sales of $150,000 or more per-week, for example. A few more are doing around $100,000 in average weekly sales. Still others, the bottom tier, aren't even close to approaching weekly sales of $100,000.

The 850,000 square-foot distribution center in Riverside is also a white elephant, which continues to bleed red ink for Tesco. The campus was built for a chain of 1,000 stores doing at least $3 billion a year in annual sales - and with a profit. There are 200 Fresh & Easy stores. Annual sales is a bit over $1 billion.

The facility is also custom-built for the "Fresh & Easy" way of doing business, logistics and distribution. It should eventually sell, but at a very low price, in our analysis.

Tesco of course wants to sell Fresh & Easy as a whole. Good luck.

As we've reported exclusively, discount grocer Aldi (we're still looking for another publication to do some reporting on what is a major development) plans to enter California in 2013. Aldi has an interest in some Fresh & Easy stores and the distribution center, according to our multiple sources. However we would be stunned were they to buy the entire Fresh & Easy operation, unless they get it at a fire sale price, which is possible.

Discounter Dollar General, which is opening numerous dollar stores and Dollar General Market grocery stores throughout California, Nevada and Arizona - the three states where Fresh & Easy does business - also has an interest in the chain. Again we would be stunned if Dollar General were to acquire Fresh & Easy as a whole. Dollar General has been acquiring vacant buildings for its stores in the three states on the cheap. The discounter also has a distribution center in Bakersfield, so doesn't need the Riverside facility.

Bottom line: We predict Tesco will have no choice but to sell Fresh & Easy off piecemeal; groups of stores and single stores, along with marketing the distribution center individually, or perhaps as a package along with a group of stores.

Tesco also has more than a score of Fresh & Easy locations sitting fallow; some with completed but empty stores, others undeveloped locations. It's nightmare; so many leases for so many fallow properties are out there we suspect many landlords are not getting all that much sleep this week.

There is interest out there for some of the Fresh & Easy stores. For example, more than one commercial real estate agent specializing in retail properties has contacted Fresh & Easy Buzz, seeking information about the chain and its stores. Our take from these interactions is that many retailers out there think they can get some stores for a huge bargain.

We've also been asked questions - looking for an informed and objective third party we take it - from representatives a couple retail chains, who are gleaning information about individual Fresh & Easy stores.

We also know of one party that has proposed a joint-venture of sorts with Tesco. In our analysis, it wouldn't fly.

But back at the ranch in El Segundo, Fresh & Easy's new CEO, Tim Ashdown, who's had a trial by fire since arriving in sunny and recently rain-soaked California in May - we reported his being moved from Asia to California exclusively here [ May 2, 2012: Reshuffling at the Top at Tesco: Retail Chief Adams Leaving Fresh & Easy For Turkey; China CEO Ashdown to Replace Him; Richie to Head China Operations] - has plenty more fire to wade through. We suggest a truckload of own brand, perhaps "Tesco's Finest," fire extinguishers might be a good idea.

Ashdown's biggest task, as we've said, is going to be keeping Fresh & Easy on life support between now and about March-April 2013, which is the time CEO Clark and the Tesco board hope to be able to dispose of Fresh & Easy - one way or the other.

Related Stories

December 4, 2012: The End is Here For Fresh & Easy: Mason Out as CEO; Tesco To Figure Out How to Exit U.S.

December 4, 2012: The End For Tesco's Fresh & Easy is Here

August 8, 2012: Fear & Loathing in the Aisles: Reduction in Hours and Selected Firings Begin Today at 33 Fresh & Easy Stores

July 28, 2012: Fresh & Easy Neighborhood Market Planning Major Renovations at Two California Stores

July 28, 2012: Fresh & Easy Neighborhood Market to Test Full-Service Checkout at Two California Stores

July 26, 2012: Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More

June 4, 2012: West Coast Bound - Aldi USA Headed to Southern California; First Stores to Open in 2013

April 10, 2012: Dollar General's California Dream Becoming Reality