Tesco's new Fresh & Easy concept ended its self-imposed exile from store openings this month, after a three-month hiatus that had analysts buzzing about the format's viability. Certainly, it's a hopeful — but challenging — time for the Cheshunt, England-based retailer, which launched the Fresh & Easy format last November and now has more than 60 locations operating in California, Nevada and Arizona.
By American standards, the stores are a curious entity. There's a minimum of decor throughout the 10,000 square feet of selling space. Most of the products are packaged, private-label fresh foods, with particular emphasis on ready-to-eat sandwiches, entrees and side dishes. Stores are staffed, but there are no service cases, and the front end is populated only by self-checkout units.
While the concept is being tweaked — a company veteran was sent over this spring to join the U.S. management team — executives remained bullish this spring when they discussed Tesco's year-end financials. In the chain's U.K. unit, which includes Fresh & Easy, net income rose 7.1% to $4 billion on sales of $74.4 billion. The company anticipates capital spending to nearly double over the previous year to $725 million, with most of it devoted to building the U.S. store network and opening a second distribution center.
Going forward, Andrew T. Higginson, the chain's finance and strategy director, said the company expects losses to begin declining after the current year “as early stores begin to mature and we see increased overhead recovery from higher volumes.”
For the time being, consumers visit the stores out of curiosity. Many like what they see, if current sales numbers are to be believed. It's likely they'll be back.
