Easing In
May 1, 2008 12:00 PM, Lauren Shepherd
U.K. supermarket operator Tesco PLC says it may be too early to start drawing conclusions about the popularity of its new Fresh & Easy Neighborhood Markets stores, the first of which opened about six months ago in California. But, the company says, customers appear to love them. “I'm very encouraged by what I see,” said Sir Terry Leahy, Tesco's chief executive, during a conference call with investors in April. “It's going much better than I could have hoped for, but, of course, it's still too early to make definitive judgments.”
Leahy made the comments after analysts and observers questioned whether the new chain, which is smaller than a typical grocery store and offers more fresh and prepared foods, was enticing U.S. consumers to leave their supermarket behind. Leahy did his best to try to put those concerns to rest, saying sales are ahead of budget with the best stores averaging over $20 per square foot each week and fresh and prepared foods selling particularly well. The average supermarket takes in about $9 or $10 per square foot a week during the first year of operations.
Jennifer Halterman, a senior consultant with Ohio-based research firm TNS Retail Forward, says the stores are likely attracting consumers pressed for time. “You can quickly get in and out of the store,” she says. Aging baby boomers may be another group frequenting the stores since Fresh & Easy's markets are smaller than an average supermarket by more than 30,000 square feet and aren't attached to mega parking lots that are hard to traverse.
Tesco now operates 60 stores mainly in California, Las Vegas and Phoenix and plans to open another 150 stores this year. But first, the company is taking a three-month break to evaluate its progress. In a company blog on the Fresh & Easy Web site, Tesco chief marketing officer Simon Uwins wrote in March that the chain had always planned to take a break from openings after opening 50 stores “to kick the tires, smooth out any wrinkles, and make some improvements that customers have asked for.” Construction on stores is expected to start up again in July.
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