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Criticisms of British Retailer Tesco ‘Foolishly Premature’

Having opened 59 stores in the region since November, British retailer Tesco PLC says it is taking a three-month break in its rapid expansion of Fresh & Easy Neighborhood Markets.

Fresh & Easy has six locations in the county, with the other 53 new stores in other parts of California as well as Arizona and Nevada.

About the size of an average Trader Joe’s grocery store, the 10,000-square-foot Fresh & Easy locations carry 3,500 items, with about half sold under the grocer’s private label. The company employs 150 in San Diego.

Spokesman Brendan Wonnacott says the pause will not delay new store openings, since none were scheduled.

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Mike Dennis, a United Kingdom-based analyst for Piper Jaffray Cos., published a report March 13 that some recent news stories have cited to support claims that Fresh & Easy’s sales are not meeting expectations.

The Business Journal was unable to access the report, but according to PerishablePundit.com, a Web site managed by perishable food industry expert Jim Prevor, Dennis’ report may be inconclusive.

“The $170,000 per week sales number is not an actual estimate by Piper Jaffray. It is better described as an assumption used to run through Piper’s analytic models and estimate the impact on the profitability of the Fresh & Easy format,” Prevor wrote on the Web site.

Retail consultant George Whalin says that he is baffled by the negative press Tesco has received in recent weeks.

“It’s not a little premature , it’s foolishly premature to sit back and judge this company’s success or failure based on five months of operations,” said Whalin.

“Maybe the fact that they’re a British company is why we’ve decided to pile on them, but it makes no sense to me,” he said.

Whalin says Tesco is doing what any smart company should do.


In Its Right Mind

While some critics say that Fresh & Easy could quell rumors by releasing sales figures, Whalin says the retailer’s decision not to reveal sales is a no-brainer.

“No new company in its right mind would disclose sales figures in its formative stages , Fresh & Easy needs a track record first,” he said.

TNS Retail Forward, an Ohio-based market research firm, predicted in November that the concept would become a “top 10 supermarket player by 2015.”

Jennifer Halterman, senior consultant for Retail Forward, estimated that Fresh & Easy could have generated $1.4 billion in sales “based on the number of stores that Tesco said it would roll out in 2008.”

“If the company doesn’t meet its store count, that would change,” she said. “But it’s early.”

Regardless of Tesco’s success, how the retailer uses its pause period will be crucial to propelling the concept forward, Whalin says.

“The smartest thing about Tesco is that they’re constantly talking to customers, asking ‘What can we do better?’ ” Whalin said. “Go into Sears and see if anybody asks you what you like and what you don’t like.”

Halterman says that the concept is a work in progress.

“They will have to determine what the demands are in different locations, and their ability to quickly react will really help them,” Halterman said.

The Southeastern Economic Development Corp. in the city of San Diego was previously in negotiations with Fresh & Easy about a possible store site along Imperial Avenue.

But those discussions have been put on hold indefinitely, according to SEDC spokesman Alexis Dixon.

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