LONDON -- With Tesco PLC's first Fresh & Easy Neighborhood Market stores set to start opening next month, Tesco leadership said this week it has a blueprint to roll out the new convenience chain beyond the western United States, reported The Wall Street Journal.
CEO Terry Leahy said the British retailer already has a substantial number of sites secured for next year and beyond for Fresh & Easy. The company is spending $510.9 million this financial year on its move into the United States, and CEO Terry Leahy said he expects the new chain to break [image-nocss] even at the end of its second year of operation.
Tesco posted strong fiscal-first-half results, showing deep pockets and earning prowess as it prepares to take on Wal-Mart and other retailers on the world's largest retailer's home turf.
The U.S. expansion by Tesco, which controls around one-third of the British food market, is among the most widely watched events in the global retail industry this year, said the report. In response to Tesco's plans to open U.S. convenience grocery stores focusing on fresh and healthy food as well as upscale prepared meals, Wal-Mart is studying a new, smaller store format of its own.
On November 8, Tesco plans to open its first five stores in greater Los Angeles, Los Angeles County, Orange County and San Bernardino, Calif. By the end of February, Tesco plans to have 50 stores across California, Arizona and Nevada. It already has a staff of 200 at its U.S. headquarters in El Segundo, Calif., and a large distribution center.
According to the Journal, Leahy said Tesco won't run a major marketing campaign to accompany its U.S. launch and instead will rely on media and word of mouth. He said local interest is strong because the stores are up with banners and signs. By opening in rich and poor neighborhoods and courting shoppers of all income levels, Leahy said Fresh & Easy will be a novelty in the generally more segmented U.S. retail market.
Tesco, which is based outside London, said net profit rose 19% to 936 million ($1.91 billion) in the 26 weeks ended Aug. 25, from 788 million ($1.61 million) in the year-earlier period. The increase came mostly from Tesco's growing international business and from real-estate deals. First-half sales rose 9.2% to 24.7 billion ($50.43 billion).
But in its British home market, Tesco suffered weaker first-half sales growth, which it blamed on the cold and rainy summer weather. Sales at stores open at least a year, and excluding gasoline sales, rose 3.5% in the first half, the slowest growth rate in years.
Leahy said he was confident about Tesco's business in the United Kingdom for the second half of fiscal 2008, as consumers continue to spend despite a string of interest-rate increases over the past year. We've had to go through some real challenges to produce these results, with reviving competition and the British summer [weather], while we are also investing in our future with [online catalog business] Tesco Direct and our plans to go into the United States, Leahy said.
Tesco operates approximately 2,800 stores, of which 1,500 are in the U.K. and Northern Ireland and the remainder in Eastern Europe, Turkey and Asia.
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