EL SEGUNDO, Calif. -- Another Fresh & Easy naysayer has joined The Perishable Pundit, who in late January expressed some doubts about British retailer Tesco's U.S. grocery/convenience concept on his produce industry blog. Tesco's plans in America have been called into doubt by a major U.S. brokerage house, which claimed the stores are struggling, reported The Evening Standard.
Piper Jaffray & Co. said sales are far short of the target and the stores need an urgent overhaul. Piper Jaffray analyst Mike Dennis—who is based in the U.K.—warned: "The Fresh & Easy concept [image-nocss] is not right and they need to quickly find out what the issues are and reset the concept."
According to the newspaper, Dennis said it could cost Tesco nearly $800 million to exit the United States—a a dramatic move the supermarket company insists it is not contemplating. Dennis claimed that the 50 Fresh & Easy stores opened so far are averaging sales of only $170,000 a week. He said he thinks Tesco was aiming for closer to $200,000 initially, rising to $270,000 later.
Tesco, the U.K. 's largest retailer and one of the largest international retailers. It is investing more than $2 billion in the United States over five years.
"The overall indication seems to be negative," Dennis said. "This begs the questions of how bad it could be for Tesco's Fresh & Easy stores across California, Arizona, Nevada and what it would mean to Tesco's long-term growth rates and international strategy in the U.S."
Analysts seem aware that Tesco may be having "teething" problems, said the report. One said he had already begun referring to Fresh & Easy as "Ambient & Quite Difficult."
A Tesco spokesperson said of the Piper Jaffray note: "This appears to be a bit of scaremongering, particularly as Mike Dennis hasn't even spoken to us about Fresh & Easy's performance. It is ridiculous to make judgments just four months after the first store opened. I don't know when Mike last visited California, but the up-to-date picture is one of growing sales, increasing customer numbers and more repeat visits."
"Tesco has yet to prove the viability of the Fresh & Easy concept," Jim Prevor, aka The Perishable Pundit, said recently. "We would expect some major revamps to the concept in the months ahead. The commitment has been substantial, so Tesco will go to great extremes to juggle the variables and get the offer right. But there is no assurance that this size footprint is viable."
Click hereto read more about The Perishable Pundit's take on Fresh & Easy.
Last week, El Segundo, Calif.-based Fresh & Easy Neighborhood Market Inc. touted the milestone of its 50th store, located in Palm Desert, Calif. Several more stores opened by the end of the week.
Although the company said it is focusing on California, Arizona and Nevada, rumors surfaced recently that Tesco is scouting locations in Illinois.Click hereto read CSP magazine's January cover story on the chain. Andclick here for retailer impressions of Fresh & Easy as to whether it is a competitive threat to the convenience store channel.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.