Tesco Rebuts Claims of U.S. Failure

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Tesco Rebuts Claims of U.S. Failure

LONDON -- International retailing giant Tesco defended its U.S. brand earlier this week, after the division came under fire from an analyst at Piper Jaffray, the Financial Times reported.

The analyst, Mike Dennis, wrote in a note to clients that the stores opened so far could be averaging sales of $170,000 a week, compared to planned initial sales of $200,000, the Financial Times reported. He also stated the slow start would hit Tesco's longer-term earnings projections, according to the report.

Tesco stated its U.S. expansions were on track -- the company has opened 50 stores on the U.S. West Coast to date -- and that the stores were "proving very popular," and stated: "What we are seeing is growing sales, growing customer numbers," according to the report.
A spokesman for Tesco in the UK told the Times Online that Dennis' claims were "a bit ridiculous, given that we only opened four months ago," and negated the analyst's firm's estimate of a $400 million pullout, stating "we are not even considering pulling out."

Dennis is not the first to question Tesco's success. In December, the CEO for southern California grocer Stater Brothers, Jack Brown, said stores had seen "almost no impact" from the first 20 Tesco stores that opened in his stores' territory, the report stated.

In addition, Jim Prevor, a U.S. grocery industry consultant and analyst, told a group of investors earlier this month he estimated Fresh & Easy stores were averaging weekly sales volumes of $50,000 to $60,000, the report stated.

Dennis also wrote that if Tesco's U.S. traffic was slow "then Tesco must be concerned that the Fresh & Easy concept is not right and that they need to quickly find out what the issues are and reset the concept or ranges," adding that the lack of traffic suggested the discount format was "not as robust a store concept as we first thought," the report stated.

Meanwhile, Tesco is continuing is U.S. push, with another 150 stores expected to open over the coming year in its initial markets, while signing leases on additional store sites in northern California, where it is planning to open a second distribution center outside Stockton, according to the Financial Times.