By Christine Blank, Contributing Editor
Published on Monday, March 26, 2012
Global supermarket giant Tesco PLC launched its Fresh & Easy format in the United States to much fanfare in 2007. Tesco had planned to open nearly 1,000 of the 12,000-square-foot stores within five years.
However, the London-based retailer has experienced a bumpy road with Fresh & Easy across the pond and is now facing increased competition and declining profits in the U.K.
Tesco announced earlier this year that it would be “mothballing” — temporarily closing — 12 Fresh & Easy stores in certain locations with weak performance. The stores are closing this quarter in Arizona, California and Nevada.
“Tesco started opening stores in the midst of an economic crisis and a housing crisis. All three of those markets have had a much higher percentage of underwater houses and foreclosures,” says Neil Stern, senior partner with retail consultancy McMillan Doolittle in Chicago.
At the same time, Tesco is opening 25 U.S. Fresh & Easy stores in the first quarter of 2012. Fresh & Easy’s sales soared 29 percent in its most recent fiscal third quarter and comparable store sales rose 11.9 percent. Tesco expects to break even with the Fresh & Easy concept by the end of its fiscal year 2012-2013.
Still, to grocery industry analysts, the rapid closures and openings in a chain of approximately 180 stores indicate strategy adjustments are under way.
“They are probably still tinkering a bit with what the right neighborhood profile is and the right offering,” says Jim Hertel, managing partner at retail consulting and strategy firm Willard Bishop in Barrington, Ill.
While Tesco has said it tailors Fresh & Easy offerings by location, Hertel and others say that is not the case. “I visited the stores when they only had a few open, and they seemed to be quite similar to one another,” says Hertel.
Instead of just altering store locations, Tesco needs to evolve its fresh offerings — including seafood — in order to be successful in the United States, say retail analysts.