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Tesco's American dream set to end with nightmare losses

Tesco's bid to take on Wal-Mart in its own back yard has been consigned to embarrassing and costly failure, with the supermarket giant £1bn poorer than before the launch of Fresh -amp; Easy in 2007.

Tesco's California-based arm has yet to make a profit and with latest figures pointing to another dismal sales performance, chief executive Philip Clarke said the group was not afraid to make "big decisions" by calling time on a venture that would take too long to deliver value to shareholders.

His strategic review, which is expected to see Tesco's presence in the US come to an end in its current form, met approval in the City as Tesco's shares jumped more than 3%.

Clive Black, retail analyst at Shore Capital Stockbrokers, said the review of the near 200-strong Fresh -amp; Easy chain was "one of the most high profile and perhaps defining moments" in Mr Clarke's tenure as chief executive.

It is also the group's second withdrawal from an international market in less than a year, having announced in August it was pulling out of Japan after ploughing more than £250m into the venture and spending eight years trying to crack the market.

The decisions mark a reversal of some of former boss Sir Terry Leahy's ambitious expansion strategy and have prompted questions over the handling of more recent international launches.

Bad timing was partly to blame for the Fresh -amp; Easy woes, with the chain arriving amid a housing market slump in California and just before the financial crisis hit.

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But the team's strategy - under Sir Terry and US chief executive Tim Mason - also appeared to be flawed from the start.

Nick Bubb, an independent retail analyst, added it was "pretty arrogant" to believe there was a gap for it in the world's most competitive grocery market.

Even renowned US investor Warren Buffett said he believed Tesco had been "foolhardy" to enter the US grocery sector.


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