Fresh & Easy, the UK arm of Tesco, has said that it is reevaluating its offering in the face of deteriorating economic conditions in the US.
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Posting its full-year results today (21 April), Tesco revealed that Fresh & Easy racked up a loss of GBP142m (US$207.6m) for the 12 months to 28 February, up from GBP62m a year earlier.
Sales in the country also came in lower that forecast at GBP208m and, instead of breaking even this year, Tesco is now looking at another year of losses from its US venture.
Although Tesco is committed to investing GBP1.25bn in the US chain over the next five years, the company revealed that it has been forced to slow its rate of expansion.
Tesco said that it would now miss its target of opening 500 stores by 2010 and is looking at having a little over half that number up and running.
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By GlobalData“We’re still opening stores, still expanding. Over the next year we will employ 1,500 new associates. In this economic climate that is some achievement,” a spokesperson for Fresh & Easy told just-food.
The company has blamed Fresh & Easy’s failure to hit sales and profits targets on the wider economic situation.
“Overall it is quite clear that the economic situation in the Western US presents a big challenge,” the spokesperson said.
While Fresh & Easy remains focused on its “core” markets in the Western US, the spokesperson added that “things could change” as the chain moves into northern California.
The company is currently in the process of securing sites in Sacramento and San Francisco, although a timetable for store openings is yet to be published, the spokesperson said.
Another issue that may have dented Fresh & Easy’s sales is product mix. The company has adjusted its own label offering to focus on promotions and value in response to the downturn, while the chain’s branded offering has also been tweaked.
“We have added a number of national brand options, for example, larger packs of diapers and children’s cereal. The changes we’ve made in terms of the Fresh & Easy brand are increasing the number of promotions and our focus on value and quality,” the spokesperson commented.
According to Fresh & Easy, own label sales account for 70% of total sales.
“The reception [to own label] has been incredible… The thing for us is making sure our values are made very clear to our customers.”
