Tesco, a retail giant in the United Kingdom, announced plans Tuesday to sell a majority of its struggling Fresh & Easy stores to a Los Angeles investment firm founded by billionaire Ron Burkle, who owns the Wild Oats Market brand.
The sale price was not disclosed.
The Yucaipa Companies is acquiring roughly 150 Fresh & Easy stores and the chain's manufacturing and distribution facilities in Riverside. About 50 markets are not included in the sale, including a Huntington Beach store slated for closure, Fresh & Easy said.
The chain operates 16 markets in Orange County. The Beach Boulevard store, has faced stiff competition from a new Walmart express market in Huntington Beach. The U-T San Diego reported five stores in Sacramento and at least two in San Diego County will also close.
It is unclear which other Fresh & Easy locations might close.
In an email sent to customers Tuesday, Fresh & Easy said markets slated for closure will offer "all products with some exceptions" at a 25 percent discount starting Wednesday.
"These stores will stay open until remaining stock is cleared," Fresh & Easy said.
The purchase is expected to be complete within three months.
"In the meantime it is business as usual for most Fresh & Easy stores," both companies said in statements Tuesday.
In recent weeks, food industry experts have speculated that Burkle was interested in buying Fresh & Easy stores so could he could reboot the Wild Oats brand. According to the Wild Oats website, the organic brand is making a comeback that involves the introduction of Wild Oats Marketplace grocery items.
Yucaipa executives declined to comment. In a prepared statement, Burkle, a major stakeholder in the parent company of Ralphs and managing partner of Yucaipa, hinted at making some Fresh & Easy tweaks.
"Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience," he said. "Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer."
Fresh & Easy will continue to focus on providing "busy consumers with more local and healthy access for their daily needs," Burkle added.
The chain's sale comes less than a year after Tesco said it would pull the plug on its pricey U.S. experiment. Tesco has invested roughly $1.6 billion in the chain, which has not turned a profit since it opened its first no-frills stores in November 2007.
Smaller than traditional markets, the 10,000-square-foot markets placed an emphasis on low-price and high-quality foods. Stores, situated in what Tesco called "food deserts," promoted private label products free of preservatives and artificial flavorings.
Early on, shoppers favored its prepared meals and ready-to-grill meats.
Customer Carrie Hawkins of Huntington Beach said she stocks up on the ready-to-eat foods at the beginning of the week.
"It is perfect for us, since there are only two of us in our household and I rarely get home before 6," she said. "It's great to have something I can just throw on the grill or in the oven and have it ready within 30 minutes, with very little mess."
Supermarket analyst Jim Hertel said Fresh & Easy needed more loyal shoppers like Hawkins to be profitable.
Stores had to generate at least $200,000 a week sales for a return on Tesco's large investment, said Hertel, managing partner at Illinois-based Willard Bishop consulting firm. Instead, he said, most locations made about $75,000 to $100,000 a week.
Buying Fresh & Easy makes sense for Burkle if he got it at a "fire sale," Hertel said.
"If he got the right price for it, he can operate at $75,000 a week and still make some money," he said. "There's positive equity in the business and in the brand name."
Tesco Chief executive Philip Clarke said the sale to Yucaipa represents "an orderly and efficient exit from the U.S. market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy."
Some shoppers expressed relief Tuesday that most stores will remain open.
"It would be a great loss if they close down," said Jill Sarandis of Garden Grove. "I have shopped at the location in Fountain Valley since it opened. The quality of all the items is amazing."
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Original headline: Fresh & Easy sold to billionaire Ron Burkle
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OCTOBER 31, 2014
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