By James Davey
CARDIFF (Reuters) - World No. 3 retailer Tesco (TSCO.L) promised to pull the plug on its loss-making Fresh & Easy chain in the United States if it continued to disappoint, and rejected renewed calls for an independent review of its strategy for the venture.
"If we see there is no chance of success, we'll do as we've just done in Japan," said chief executive Philip Clarke, referring to Tesco's deal this month to exit that market.
"It is not about ego, we are businessmen," he told the British grocer's annual meeting in the Welsh capital, Cardiff, on Friday.
The Change to Win Investment Group, which advises U.S. trade union-sponsored pension funds, during the meeting asked Tesco to establish a committee of non-executive directors to review Fresh & Easy's future and set fixed benchmarks to measure its success.
"We will not be doing that," responded chairman Richard Broadbent.
He said the strategy for Fresh & Easy was regularly reviewed by the whole board, with the retailer providing full disclosure on the business in its annual report and accounts.
"We're not hiding anything at all on Fresh & Easy," he said.
Change to Win's proposals have been ignored by Tesco for several years. It regards them as union motivated. Fresh & Easy does not recognize trade unions.
Clarke has this year rejected shareholder calls to pull the group out of the United States.
In April he said he did not expect the chain to break even until its 2013/14 financial year, against a previous target of 2012/13.
This month, Tesco reported underlying sales growth at Fresh & Easy slowed to 3.6 percent in its first quarter from 12.3 percent in the fourth quarter of last year.
"What shareholders want to know is, where is Fresh & Easy going and how much will it cost to get there?," said Michael Zucker, Change to Win's director of retail initiatives.
PAY APPROVED
Once one of the most consistent British companies in terms of earnings growth, Tesco stunned investors in January with its first profit warning in more than 20 years, saying it needed to invest heavily to stem a steady decline in UK market share.
However, it avoided becoming the latest victim of the 'shareholder spring' which has seen investors resist big pay rises at underperforming companies.
The phenomenon has led to the departures of Aviva (LSE:AV.) boss Andrew Moss and Sly Bailey, head of newspaper group Trinity Mirror (TNI.L).
Some 96.9 percent of shareholders who voted at the meeting backed Tesco's executive pay report, even though Pensions Investment Research Consultants (Pirc), a pension fund consultant, had called on investors to vote against it.
Last month's move by Clarke not to take his 372,000 pounds ($576,800) bonus may have headed off any potential rebellion.
He told the meeting Tesco's strategy to revive its core UK business, which accounts for about one in every 10 pounds spent in British shops, and about 70 percent of Tesco's annual trading profit, was making progress as he addressed shareholder concerns ranging from empty shelves to rodent-infested stores.
This month, Tesco reported a fall in first-quarter underlying sales in Britain and said tough trading conditions showed no sign of improving.
Broadbent gave Clarke his backing when one shareholder asked if the latter would resign if he could not deliver recovery in the U.S. and the UK.
"Phil is evidently one of the best retailers in the world. There is absolutely no question of Philip Clarke resigning," said the chairman.
After the meeting Clarke was asked if the British government should be doing more to stimulate economic growth.
"I think there's a case for it," he told reporters.
"Peoples' disposable incomes are squeezed. Until there's some change I think it will be hard for everybody."
But he welcomed this week's move by the government to scrap a planned increase in fuel duty and took some comfort from recent falls in the oil price.
Shares in Tesco, which lags France's Carrefour (CA.PA) and U.S. industry leader Wal-Mart (WMT.N) in annual sales, have lost nearly a quarter of their value over the last year. They closed down 0.6 percent at 310 pence.
30.6.2012
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