Timeline: Tesco's attempt to crack the US
Tesco's US journey could be coming to a close
Almost seven years since Tesco first announced its plan to enter the US, the UK retailer has today (5 December) said it is "likely" to quit the market. Tesco said it would take too long for its Fresh & Easy chain to reach the "scale and profitability it needs". Here, just-food, looks at the ups and downs, the optimism about and the criticism of, Tesco's US venture.
Tesco announces plan to enter US market. Says will launch convenience format on West Coast. "With the new format we now think we can expand and be profitable in America," then CEO Terry Leahy said.
Tesco confirms it will enter the US market under the 'Fresh & Easy Neighbourhood Market' banner.
The UK retailer targets opening 100 Fresh & Easy outlets in four US cities within 10 months. At around 10,000 square feet in size, the stores will be smaller than conventional US grocery stores in order, Tesco said, to make shopping quicker and easier.
Tesco says first six stores will open on 8 November. The retail giant said the openings will mark "a major milestone" for the company, adding that it had spent years researching and planning the Fresh & Easy format.
Tesco is looking to expand its Fresh & Easy business into San Francisco and northern California. The company has opened 15 Fresh & Easy outlets in Las Vegas, San Diego, Phoenix and Los Angeles and is aiming to have 200 outlets in the US by 2009.
One question mark over Tesco's strategy is over the amount of own-label products sold in store. A Fresh & Easy outlet sells around 3,600 SKUs and of that around 50% is own-label, a proportion much higher than a typical US supermarket. "It is an important issue," Shore Capital analyst Clive Black says. "Once the dust settles and the novelty wears off, it will be interesting to see whether the US consumer takes to own-label. The US consumer is quite a sophisticated consumer and is very brand-oriented."
Tesco brands claims its Fresh & Easy stores in the US have fallen short of expectations as "scaremongering". According to The Financial Times, Mike Dennis, an analyst at US broker Piper Jaffray, said the 50 Fresh & Easy stores opened around Los Angeles, Phoenix and Las Vegas were averaging sales of US$170,000 a week, against initial planned sales of US$200,000.
UK retail giant Tesco admits it is putting the brakes on its US expansion plans amid the economic slowdown in the country.
Tesco's US venture will "last for a generation", chief executive Sir Terry Leahy insists.
Fresh & Easy opens its 62nd store in Manhattan Beach, California as Tesco resumed the roll-out of its US chain after a three-month hiatus.
Fresh & Easy admits it has slowed the pace of its expansion drive and adjusted its offering in response to the economic downturn. "The areas we are expanding in… have been hit very hard in the downturn," a spokesperson says. "Folks are now extremely focused on price… and we have adjusted to reflect this."
Sir Terry Leahy says Tesco will press on despite the economic pressures affecting the West Coast of the US. "I don't have any regrets about the strategy but I have regrets about opening in a recession," he says.
Tesco insists losses from Fresh & Easy had "flattened out" and says it will open more stores. "The consumers that get it are completely hooked on it. Fresh & Easy has a different offer and is a different way of shopping," Leahy says.
Leahy announces he will step down as Tesco chief executive in March.
Investor group CtW writes to Tesco shareholders ahead of AGM and says "viability" of Fresh & Easy is "increasingly in question".
Tesco announces plans for first stores in northern California.
Clarke insists it is "essential" that losses from Fresh & Easy come down after the division's bottom line worsened over the previous 12 months.
Speculation over the future of Tesco's US operations mounts, with some industry watchers believing potential Californian restrictions on the sale of alcohol could be a hammer blow for business. Investor Warren Buffett describes the venture as "foolhardy".
Tesco quits Japan, leading some industry watchers to wonder whether the UK retailer could leave other international markets, including the US, in addition to China and Turkey.
Tesco says its target to make its Fresh & Easy business break even by the end of the 2012/13 financial year will not be achieved. The retailer estimates the point will be reached during the 2013/14 financial year.
Speaking at the World Retail Congress in London, Clarke insists Tesco will continue to persist with Fresh & Easy. "The stores we have continue to grow nicely. The reason it's worth persisting with is the stores fulfil a particular need for a particular group of customers. It's only five years old. It's playing in a playground with some very big and some very old retailers that are very wise and it's fighting nicely," Clarke said.
Tesco confirms plans for "strategic review" of US operations. Clarke says it is "likely" the retailer will quit the market - five years after opening first store.
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