Tesco shows it knows the way to San Jose with new California stores

The supermarket has opened two stores in northern California, and has plans for 10 more. Is this a last-ditch attempt to save its US presence?

by Emma Haslett
Last Updated: 06 Nov 2012
Cheryl Cole isn’t the only one this week having difficulties making it Stateside. Tesco has been having its own problems – and has now raised eyebrows by announcing that it’s just opened two new Fresh’n’Easy stores in Northern California. Apparently, the two new stores are in San Jose and Danville, both in the San Francisco Bay area, and the supermarket added that it’s got plans to open another 10 around Northern California before the end of April. Tesco has been having trouble with the chain, which has so far failed to turn a profit, despite optimistic pronouncements back at the start. But this move provides an indication that (Geordie accents notwithstanding) the supermarket isn’t giving up on its US plans quite yet…

So far, Fresh’n’Easy hasn’t quite been the success Tesco had anticipated. The chain posted a £165m loss last year, and isn’t due to break even by the 2012-13 fiscal year, much later than Tesco had hoped. And the chain had more bad news last year, when it was forced to mothball (ie. board up or rent out) 13 stores across Arizona, Nevada and Southern California, because the housing market downturn in the US meant people weren’t spending enough (or, in some areas, there just weren’t enough people).

For new CEO Philip Clarke, who took over from Sir Terry Leahy on Tuesday, Tesco’s strategy in the US represents something of a dilemma. Many analysts had expected the company to pull out of the country as Fresh’n’Easy continued to make a loss. But Clarke is clearly made of sterner stuff, and is willing to give it one last try.

Still, this might be Fresh’n’Easy’s final chance. As analyst Clive Black, from Shore Capital, pointed out, the chain has ‘undoubted potential, but if it is not delivered, a radical course of action will be followed’. Which might be a little more drastic than La Cole’s voice coach…

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