Thursday, April 17, 2008

Tesco's Sir Terry: Fresh & Easy Will 'Last A Generation'

From: CSP: Convenience Store Petroleum News

Issue Date: CSP Daily News, April 17, 2008

Fresh & Easy Will 'Last a Generation'
Leahy defends Tesco's new U.S. stores, dismisses critics

LONDON -- Sir Terry Leahy, the CEO of Tesco PLC, has responded to critics of the British retail giant's new Fresh & Easy Neighborhood Market convenience/grocery stores in the United States, claiming that the fledgling chain will "last a generation." He told The Telegraph that customers "love" the American chain.

Leahy's strong defense of the stores, which critics claim have "underwhelmed" U.S. shoppers since the chain's November launch, came as Tesco reported record full-year pre-tax profit of £2.8 billion ($5.52 billion U.S.), up 5.7% over last year. Sales across the group rose by 11% to £51.8 billion ($101.2 billion).

More than half of Tesco's growth in trading profit now comes from its overseas ventures, said the report.

El Segundo, Calif.-based Fresh & Easy came under fire soon after the chain debuted. Critics said that it was not performing well and that the concept may be flawed. (Click here to read CSP Daily News coverage about the criticism.)

Fresh & Easy announced in late march that it would temporarily halt store expansion, later explaining that was an intended part of the chain's strategy from the start and was not an indication of any problems. (Click here to read CSP Daily News coverage of the "time out.")

In a "powerful and confident" presentation, designed to counter a flurry of negative press articles, Leahy outlined Tesco's strengths as the world's third largest retailer, said the newspaper. He argued that its broad geographical base and wide range of products will allow it to weather a downturn.

He "rubbished" reports that Fresh & Easy, which has more than 60 stores, is struggling, said the Telegraph. He said that sales at the chain are ahead of budget and that its sales per square foot, a key metric in measuring shops' success, is $20 per square foot per week, double the U.S. average.

"It is just 167 days since we opened the first store. I believe the chain will last a generation," said Leahy. "It is going to be much better than we expected. Customers love it."

He also claimed, according to the report, that a growing number of U.S. consumers have stopped eating at fast-food restaurants in order to buy Fresh & Easy's ready meals.

"There's a lot of ill-informed comment. We're very pleased with the way things are going over there. We're seeing sales growing on a very consistent basis. The customer reaction is absolutely outstanding," Tesco finance director Andrew Higginson said in an interview with Thomson Financial News.

Higginson said the group remains on track to open another 150 U.S. stores this year and will recommence the opening program on July 2.

"There's always people queuing up to tell Tesco that it's a failure. We had exactly the same situation with our international business 10 years ago when we were derided for the attempts to go abroad. Today that business makes over a billion pounds of EBITDA. We feel very confident that the U.S. is going to be a similarly large success story," Higginson added.

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