LONDON -- Tesco CEO Terry Leahy is "increasingly encouraged" by the prospects for the British supermarket giant's entry into the United States in the autumn as demand for healthy and organic foods grow, said a Reuters report.
Announcing a record 2.5 billion pound ($5.22 billion U.S.) yearly profit, Leahy said Tesco's decision to open smaller, convenience-like stores with a focus on their "green" credentials could work to its advantage in the world's most competitive retail market.
"I think it's well timed as California reassesses [image-nocss] its consumption in the light of climate change and people in the United States are looking are looking for an alternative to big box retailers," Leahy told reporters.
Tesco said it was also tripling its startup costs to make a "major effort" for its U.S. launch to 65 million pounds ($130.5 million) from 20 million pounds ($40.15 million), heightening expectations its long-term aim is to take on Wal-Mart Stores Inc. on its home turf, according to Reuters.
"We are expanding quickly so we are going to be opening up and having the carrying costs of quite a lot of stores as we get going," Leahy said during a conference call.
The much-anticipated launch of Tesco's Fresh & Easy Neighborhood Market in the second half of this year is so secretive its test store was built inside a California warehouse and curious onlookers were told it was a Hollywood movie set.
Although keeping to Tesco's policy of not providing the finer details of its U.S. opening plans, Leahy said he planned to open a significant number of stores later this year in Los Angeles, Phoenix, Las Vegas and San Diego. "We are pleased with the progress. Morale is very, very high and people are excited about the business," he said.
Analysts speculate Tesco could roll out nationally within a year with 300 stores tapping a new market for lower-cost, healthy fresh foods, particularly in the inner cities.
Tesco confirmed it would spend 250 million pounds ($501.8 million) per year and open stores of just 10,000 square feet, smaller than a traditional 45,000-sq.-ft. grocer or a Wal-Mart supercenter with 200,000 square feet.
A buoyant mood at U.S. Tesco is expected to be particularly uncomfortable for Wal-Mart, which built its business on strong worker loyalty, but has seen some of that eroded in the past year by negative publicity and employee lawsuits, Reuters said.
And as reported yesterday in CSP Daily News, Tesco's Fresh & Easy has launched an enhanced website, www.freshandeasy.com, which the company said is part of [its] ongoing effort to provide news and information about its stores, culture and philosophy.
Tim Mason, Fresh & Easy Neighborhood Market CEO, said, "As we prepare to open stores in neighborhoods throughout the West, we are excited to provide consumers with a tool to learn more about Fresh & Easy Neighborhood Market and the opportunities that will be coming into their communities later this year."
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