Sunday, April 13, 2008

Breaking News: Tesco's Fresh & Easy USA Hires New Public Relations Firm; Tesco PLC Set to Announce Annual Sales and Profit Numbers Tuesday

Tesco's Fresh & Easy Neighborhood Market, the operator of 61 small-format, combination basic grocery and fresh foods grocery stores in the Western USA, has hired a new public relations firm to assist the retailer in better getting its message out, as well as to provide it with support for its strategic communications and marketing communications efforts, we've learned from our sources.

While we haven't learned the name of the new PR firm Fresh & Easy Neighborhood Market has retained, we do know it's a smaller-size firm (based on common industry standards) with an office in Southern California. Additionally, we've learned Fresh & Easy executives interviewed at least three public relations firms, ranging from large operations to small firms, before deciding on the firm they've retained.

We're told one of the reasons Fresh & Easy went with the PR firm it selected is because the retailer still considers itself a small, start up-oriented retail business (which it is), even though it's parent company is the world's third-largest retailer, and thus thought a smaller-size firm was a good fit for its current state of retail operations and development.

We first reported on March 17--and are the only publication to our knowledge to have reported it to date--that Tesco's Fresh & Easy Neighborhood Market was then in the process of interviewing public relations firm in Southern California.

United Kingdom-based Tesco, which is that nation's number one retailer with about a 31.9% market share as well as being the third-largest retailer in the world with annual sales of about $63 billion (USA), is set to report its fiscal year annual sales on Tuesday, April 15.

There's been much drama in UK and global financial circles leading up to the retailer's annual fiscal year sales report on Tuesday.

For example, a number of investment firm analysts like those in the UK offices of Citicorp and Goldman Sachs have been asking Tesco to break out its sales thus far for its USA Fresh & Easy grocery store chain, because of numerous reports the stores are underperforming in sales compared to Tesco's internal sales targets for the fledgling chain.

As we've reported, based on our sources we estimate the Fresh & Easy stores are doing about $60,000 -to- $100,000 per-store, per-week in overall gross sales, compared to Tesco internal targets of about $200,000 per-store, per-week for this point in time in the chain's development in the Western USA. We've also said the $200,000 sales target is just that for Tesco; a target rather than a "drop dead" number.

Other industry analysts have estimated sales at our lowest-end number of $60,000 per-store, per-week. As we've said here before however, we believe based on our source information and analysis, our numbers--and range--is a better estimate than suggesting the $60,000 flat number weekly sales estimate, unless the other analysts are getting that number directly from Tesco's CFO or Fresh & Easy CEO Tim Mason.

Based on the information we have, we do not believe Tesco will breakout the Fresh & Easy sales numbers separately when it reports on its fiscal year annual sales on Tuesday, like a number of financial analysts are hoping will be the case.

The retailer does however plan to address Fresh & Easy USA with the UK and global stock analysts rather than just ignore the topic.

We've learned Tesco will present some store-level and research data on Tuesday designed to demonstrate customer-counts and sales are growing at the 61 small-format Fresh & Easy grocery stores located in Southern California, Arizona and the Metropolitan Las Vegas, Nevada region in the Western USA.

Additionally, it's likely Tesco Fresh & Easy USA CEO Tim Mason will attend the annual sales presentation with Tesco CEO Sir Terry Leahy and Tesco's CFO, according to our sources.

According to a number of estimates coming out of both UK and U.S. investments houses, Tesco's annual profits are expected to be about 10-11% higher than last year's, on a gross sales gain of about 10%, when reported on Tuesday.

Further, its estimated about 50% of Tesco's profits will come from its international business outside of the UK. The retailer has operations in Europe and Asia as well as in the USA.

The overseas market is of particular importance for Tesco as recent sales analysis in the UK shows two of its rivals, ASDA (which is owned by Wal-Mart) and Morrisons, beginning to gain some ground on the market share leader Tesco at home in the UK.

For example, respected market research firm TNS Worldpanel recently released data which said Tesco's market share in the UK has dropped to 30.9% this year, compared to a 31.3% share last year. TNS attributes the share loss to increased gains by the Morrisons' and Asda chains.

The importance of international sales to Tesco's sales and profits also is why the Fresh & Easy USA performance to date is so important.

Tesco has said it plans to invest about $2 billion in the U.S. grocery retailing venture, eventually having as many as 1,000 stores across the Atlantic in America.

However, with the stores underperforming and many analysts believing the problems are greater than just start up pains, the financial community is focused on Fresh & Easy USA closely even though its size and level of investment is small presently compared to Tesco's other overseas ventures.

How Tesco deals with Fresh & Easy USA in the annual sales report on Tuesday will have a significant effect on the retailer's stock share price as well as on how the press reports the story, in our analysis. Shares in Tesco have dropped by 18% since the first of the year, largely on reports of the global retailer's losing market share at home in the UK. When you are as big and successful as Tesco, even a less than 1% market share loss matters to the markets.

However, Fresh & Easy USA also has contributed to the drop in share price, according to most Wall-Street and UK financial industry analysts.

As we reported last month, Fresh & Easy is taking a three month pause or hiatus from opening any new stores. This announcement--which was mentioned in a post on the Fresh & Easy corporate blog by company marketing director Simon Uwins and we were the first U.S. publication to report on--has injected some uncertainty among financial analysts and investors in Tesco shares, lending to the 18% drop in value since early this year.

Tuesday will be an interesting day vis-a-vis Tesco plc and its Fresh & Easy Neighborhood Market USA small-format grocery store retailing venture. We will be covering Tesco's sales and profit reporting--and analyzing, covering and writing about it here on Fresh & Easy Buzz for our readers.

No comments: