CHESHUNT, England — Tesco here said yesterday it plans to open between 60 and 70 new Fresh & Easy Neighborhood Markets this year in additional cities in the Western U.S., although it expects losses in the U.S. to continue until the economy recovers.
Speaking with investors in a conference call here, Sir Terry Leahy, chief executive officer, said Tesco could reduce the losses “if we wanted to, but it's important to keep pushing on into the recession to keep our momentum up because that will give us a strong growth platform when the upturn comes, which it will.”
For the fiscal year that ended Feb. 28, the loss for Tesco's 115 Fresh & Easy stores increased to $208.5 million (U.S.) at actual rates — equal to $180.6 million at constant rates — compared with $91 million a year ago. Sales were $305.4 million, and same-store sales rose 30%.
The company said the loss for Fresh & Easy was higher than the guidance it had previously provided, “reflecting the more challenging trading environment in the Western states and our decision not to open stores in Northern California for the time being. The U.S. trading losses reflect the fact the U.S. business has been built with the necessary infrastructure in place from the beginning to support hundreds of stores. At this stage, therefore, it is operating with high overhead and other costs in relation to the scale of the business, while also trading from immature stores.”
The company said overall sales at Fresh & Easy were lower than it anticipated at this time a year ago “as a consequence of our previously announced decision to maintain, rather than accelerate, our rate of new-store expansion during the second half, given the severity of the economic downturn in some geographic markets in the Western U.S.”
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