Tesco Tweaks Stores, Readies 2nd Growth Spurt

Fresh & Easy Neighborhood Markets, the U.S. division of United Kingdom-based Tesco, will end a three-month hiatus in two weeks when it opens its 62nd U.S. store in nearby Manhattan Beach. It expects to maintain an aggressive store-opening program through the end of Tesco's fiscal year in February, with approximately 140 more units in Southern California, Arizona and Las Vegas.

EL SEGUNDO, Calif. — Fresh & Easy Neighborhood Markets here, the U.S. division of United Kingdom-based Tesco, will end a three-month hiatus in two weeks when it opens its 62nd U.S. store in nearby Manhattan Beach.

It expects to maintain an aggressive store-opening program through the end of Tesco's fiscal year in February, with approximately 140 more units in Southern California, Arizona and Las Vegas. A spokesman declined to say if the chain's expansion into the Bay Area and Sacramento in Northern California will begin this year or in 2009.

The first three openings will be in Manhattan Beach on July 2, in North Las Vegas on July 9 and in Fountain Valley, Calif., on July 16.

The company said those stores will incorporate a series of changes the chain has already disclosed, including the addition of 250 more private-label items; new colors and signage; and additional shelf labels — changes that have already been added at a handful of Fresh & Easy stores that opened prior to the hiatus.

A chain spokesman told SN that Jeff Adams, who left Tesco's Lotus operation in Thailand to join the U.S. management team late last month as co-executive vice president of operations, had no part in changes made during the hiatus. “He's come on board on the retail side to help oversee the store-opening program over the next few months,” the spokesman explained.

Fresh & Easy announced in early April it would temporarily halt new-store openings after rolling out 61 U.S. stores in five months. The pause was implemented “to allow the business we've created to settle down [and] to kick the tires, smooth out any wrinkles and make some improvements that customers have asked for.”

Fresh & Easy executives said in a consumer newsletter that the changes are based on customer feedback.

The Fresh & Easy spokesman told SN the added colors involve accents to the basic greens, blues and yellows that dominate the current color palette.

New signs include messages on the walls or shelving that reinforce the chain's low prices, recycling practices, the avoidance of artificial colors or flavorings, and the use of natural light to reduce energy costs.

Some observers said they thought the changes Tesco described were more subtle than what they had anticipated.

“Those are not the kind of changes a lot of people would expect after a company took time out to reassess,” Neil Stern, a consultant with McMillan Doolittle, Chicago, told SN.

The reason for so few changes, he said, might be “that they don't feel there's anything wrong with the concept — the issue is: The consumer is just slow to get it, and that will take time.”

Mike Griswold, a Boise, Idaho-based consultant with AMR Research, Boston, said the hiatus by Fresh & Easy “has created a rebuilding of anticipation similar to the anticipation before the first store opened last November, and with a three-month break, most people will be looking for something more substantial than the changes it seems to have made.”