LONDON -- Tesco PLC appears to be on track with its plans to open at least 100 convenience stores during its first year in southern California, and CEO Terry Leahy told shareholders last week in London that the board expects the U.S. unit to be "making a profit within a year or two," reported French financial website EasyBourse.com.
As reported in CSP Daily News, the British retailer said in February that it planned to enter the U.S. market on the West Coast with a c-store formatto be called Fresh & Easythat uses the Tesco Express model it has refined [image-nocss] in its home market. [To read more about Tesco's U.S. plans, watch for the July issue of CSP magazine.]
Tim Mason, who was marketing and property director, will head up operations in the United States, and he will stay on the Tesco board. Tesco has also recruited its CFO in Korea, Remco Waller, to help Mason run the U.S. division. Waller, who will oversee the U.S. financial accounts, starts today, the report said.
Tesco has acquired land for the construction of a new U.S. distribution facility, Mason said. He added that his small team has recruited around a third of its head office staff so far. "We are over 60 now, the vast majority of whom are American," he told EasyBourse, noting the total U.S. head office count will be fewer than 200 employees.
The company is looking for parcels of land that could accommodate stores of up to about 15,000 square feet in size, comparable to the chain's Tesco's Metro model, although the Tesco Express model is approximately 3,000 sq. ft. in size. Using a smaller format, Tesco hopes to avoid the pitfalls that have blighted other European grocery stores seeking to expand in the United States and to avoid direct competition with the likes of Wal-Mart.
The distribution center, east of Los Angeles, will be up to 1.4 million square feet in size and will support 300 or more stores. The company is also seeking store sites and planning an additional distribution center near Phoenix. The first stores are due to open in 2007.
Tesco has said it plans to invest up to 250 million pounds (about $463 million U.S.) a year in its U.S. chain. In February, Tesco said the unit is expected to breakeven by the end of the second full-year of operation.
Meanwhile, in an effort to quell community complaints concerning its Tesco Express c-stores in the United Kingdom, the company has revealed a new range of shop fronts designed to make stores blend in better locally.
The new looks, the company said in a statement, have been inspired by the comments and thoughts of local people and customers who wanted more subtle and welcoming designs that make the in-store offer much more visible from outside. The designs will enable new stores to sit comfortably within the existing architecture of different kinds of buildings, and in many cases restoring original features.
"Our Express stores are hugely popular with over seven million customers each week and we have listened to what they have been telling us, Tesco Express CEO Colin Holmes said. They want our shops to blend in better to their neighborhood, so we've developed new shopfronts that will enable us to take a more flexible approach when we design new stores. This will also mean going back to stores where we know we have got it wrong and giving them a much improved shop front.
At one end of the spectrum a contemporary design is being developed for urban Tesco Express stores, using modern architecture, open glazing and has a simple "Tesco" above the door. At the other end, a traditional look is being developed. Restoring the architecture of the original shop fronts will give stores such as these a more classic look, while keeping the shop front open and welcoming. The shopfronts will feature a new Tesco Express logo, which for the first time will see Express appear in white out of a dark blue, as opposed to the traditional Tesco colors of red and blue.
To learn more about the Tesco Express model, see the related story in this issue of CSP Daily News.
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