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Tesco ponders sale of US operation

Tesco signalled an embarrassing retreat from the US today and admitted a key part of its performance in the UK was still not good enough.

The supermarket giant, which recently reported its first drop in profits in 20 years, confirmed it was launching a review of its US operation Fresh & Easy that could see the chain sold off.

Tim Mason, who ran the US business and has been with Tesco for 30 years, will leave the company.

In the UK, Tesco said its sales fell back into the red in its third quarter after a poor non-food performance held back improvements in its grocery arm.

Chief executive Philip Clarke admitted the non-food performance was "not good enough" as the group reported a 0.6% fall in like-for-like sales excluding VAT and fuel in the 13 weeks to November 24.

The review could see the US business sold off, closed or placed into a partnership with another retailer, but the group admitted the process was likely to result in its presence in the US coming to an end.

Speaking from Los Angeles, Mr Clarke said the business and its 5,000 staff would continue to operate as normal while the review is ongoing.

Tesco said it had invested £1 billion in Fresh & Easy since its launch in 2007, but the chain has never made a profit, losing £74 million in the first half of this year.

Mr Clarke said his priority was to deliver long-term value for shareholders.

"Whilst the business has many positives, its journey to scale and acceptable returns will take too long," he added.

Tesco said it had already received approaches from a number of potential buyers for some or all of the US business.

The group, whose shares rose 4% today, will report back on the Fresh & Easy review when it posts full-year results in April.

In the UK, today's third-quarter figures show that, despite tough non-food trading, Tesco's fightback against resurgent rivals is beginning to pay off.

It grew grocery sales by 1.2% on a like-for-like basis and said it outperformed the market.

Market share data from Kantar Worldpanel yesterday revealed that Tesco had seen the best sales growth of the "big four" players in the four weeks to November 25 and grew its market share.

This came as a marked turnaround on recent declines when it lagged behind the performance of big rival Sainsbury's.

But non-food sales continue to drag on its overall performance, with difficult trading in consumer electronics goods and a general fall in consumer spending hitting the group.

The group's third-quarter sales decline follows growth of 0.1% in the second quarter.

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