Tesco: In and Out?

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Tesco: In and Out?

LONDON -- Tesco believes its entry into the United States later this year could create "billions of pounds in value," but the company is prepared to pull out fast should it prove unsuccessful, a senior executive said in an interview published Thursday.

"If it is a failure with consumers, you have got to be prepared to pull the plug, and we would move fast, but you don't go in with that view," Strategy and Finance Director Andrew Higginson said in a interview with The Business magazine.

"This is a launch, not a trial. The way we see this is it is an investment -- if we create a success, it will be something we can roll out that will create billions of pounds in value."

However, Reuters reported that a Tesco spokesman denied unattributed comments in The Business, which said the world's fifth largest retailer had privately set a 1.5 billion-pound cap on the amount it is prepared to sacrifice if its move to open U.S. stores fails. Higginson was quoted as saying that the Tesco business would be able to sustain a 1.5 billion-pound (U.S. $3 billion) loss.

"There is no cap and we are very excited about the business in the United States. We have spent a long time researching the market and we think we have a winning combination," Tesco spokesman Greg Sage told Reuters.
Tesco will open 10,000-square-foot convenience-style stores in Los Angeles, San Diego, Las Vegas and Phoenix this fall with a focus on lower-priced, healthy foods.

It expects startup losses this year of around 65 million pounds and aims to invest 250 million pounds yearly going ahead, according to Reuters.

Tim Mason, who is heading up Tesco's U.S. push, said last month he aims to open 100 stores by February 2008. If successful, analysts expect it to push nationwide.

"We are positioning it in between America's Wholefoods Market, which does fabulous food unbelievably expensively, and Wal-Mart, which is as you would expect. We want great quality and price," Higginson said in The Business interview.