By Michael Heggie
A senior executive from Tesco has said that the troubles in the American economy will force the supermarket giant to slow the expansion of its fledgling Fresh & Easy business on the West Coast of America.
Tim Mason, chief executive of Fresh & Easy, has said that plans for the chain to expand into northern California could be put on hold because of the recession gripping the United States.
Fresh & Easy are to take a far more flexible approach towards the expansion of the business.
Mr Mason said: “The industry is in a very different place than when we came out and did the feasibility research three years ago. Then the US consumer confidence index was at the highest level it had ever been.
“There’s a big cost step for us when we open up northern California and we can be quite flexible about when we do that. As things get to a point that we like how it’s all coming together, we like the way the stores are growing into the second year, then we can accelerate.”
Tesco had hoped to have 200 Fresh & Easy stores, modelled on its Tesco Express format. These stores will operate across California, Arizona and Nevada by February next year. However this target has been switched to November due to the recession.
The comments come two days after shares in Tesco had suffered their biggest one-day fall for a month after it emerged that the group’s sales in South Korea, Tesco’s largest market outside the UK, and China had slowed in the tougher economic climate.
Tesco is spending $1.25billion over five years trying to break into the US. The move has been the subject of speculation since the first store opened near Los Angeles a year ago.
Tesco has failed to compete with the other big name supermarkets in the US, such as Albertsons or Ralphs. The company has put far more emphasis on price promotions to emphasise the brands value for money.
Mr Mason added: “Starbucks and Costco, to pick but two, have said that California, Arizona and Nevada are among the most difficult places that they operating in. Tesco has stores all over the world and there have been one or two weeks where customers everywhere wake up on a Monday morning and say: ‘Oh dear.’ Times are quite tough.”
However, Mr Mason insisted that critics are wrong and highlighted that to go from no stores to 100 in a year was an “exceptional” achievement.