British retailer gives up on U.S. supermarkets

  @MarkThompsonCNN December 5, 2012: 7:09 AM ET
fresh and easy grocery

Tesco has potential buyers for the Fresh & Easy chain

LONDON (CNNMoney)

The Fresh & Easy chain has been put up for sale, as U.K. retail powerhouse Tesco admitted defeat in its attempt to take on established supermarkets in the United States.

Tesco launched Fresh & Easy in California in 2007, hoping its chain of smaller stores would draw customers away from large Wal-Mart (WMT, Fortune 500) or Safeway (SWY, Fortune 500)supermarkets.

But Tesco (TSCDF) underestimated the reluctance of shoppers to change their buying habits, and has been forced to retreat after five years of losses and a total investment of about $1.6 billion.

Fresh & Easy CEO Tim Mason, who has been with Tesco for 30 years, will leave the company.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate time frame in its current form," Tesco said in a statement.

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Boutique investment bank Greenhill will conduct a strategic review of the U.S. business. All options are being considered.

"In recent months, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business," the company said.

The results of the review will be announced along with full-year financial figures in April.

Fresh & Easy's woes have added to the problems Tesco faces in the U.K and other international markets. Third-quarter sales at stores open a year or more fell company-wide by 1.3%, as depressed consumer spending in the U.K. and Europe outweighed an improvement in Asia. Tesco's share of the U.K. market is also declining.

The U.S. chain reported same-store sales growth of 1.8%, down from 6.9% in the second quarter.

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