California Bill Could Lead to End of Fresh & Easy, Analyst Says

LONDON -- A bill that would ban the sale of alcohol at self-service checkout stations in California could hasten Fresh & Easy parent company Tesco's exit from the U.S. market, according to MF Global analyst Mike Dennis.

"The bill [is] nicknamed 'Tesco Fresh & Easy Law' because Tesco's Fresh & Easy has 126 stores out of 175 in California, and is the only grocery chain that offers only self service checkout and not the full service options that you would get in Stater Brothers or Safeway," said Dennis. "The implications are that Tesco, [which] has beer, wine and spirits on sale in nearly all its California stores, will need to have manned checkouts by law in order to sell alcohol. Tesco already has a high fixed cost issue with very weak sales densities."

Assemblywoman Fiona Ma proposed the bill, which is similar to a one that passed in 2010 but was vetoed by then-Governor Arnold Schwarzenegger. "The difference this time is that we do not expect the California Governor Jerry Brown, a Democrat, to veto the bill," stated Dennis.

In the fiscal year that ended in February, Tesco lost $296 million, a larger-than-expected loss according to reports.