Tesco's to set up shop in US

[mawilson 2,133]

Tesco to set up shop in US

Mark Tran

Thursday February 9, 2006

UK supermarket giant Tesco today announced the risky step of entering the US,

a market where other British retailers have seen their ambitions dashed.

Britain's leading supermarket will open its first convenience stores on the west

coast next year at a cost of £250m.

Tesco shares slipped on the news amid doubts over its latest venture, but the

company's chief executive, Terry Leahy, said the ground had been carefully

prepared.

"It is a market we have researched extensively for many years and over the last

year we have committed serious resources to developing a format that we believe

will be really popular with American consumers," Sir Terry said.

The new venture is modelled on the company's Express stores, which now operate

in five countries where more than 800 outlets serve around eight million customers

a week.

"We know we can't just transplant the UK model or copy other models that are

already there," Sir Terry said. "The US is a very large market to grow into, and

you're allowed to grow there - there are no restrictive planning laws."

Tesco, by far the dominant supermarket in the UK, faces increasing resistance in

Britain to building more superstores on rural sites and criticism from environmental

and consumer groups.

With the company already controlling 30% of the UK market, it has looked

increasingly overseas for opportunities to expand.

The company has a presence in 12 countries outside the UK, mainly in Asia and

central Europe, and half of its selling space is now outside the UK. A retail colossus,

Tesco has 2,467 stores and employs over 370,000 people.

"Today's announcement represents a strategic move into another developed market,

complementing our entry into the emerging Chinese market in July 2004," Tesco said.

"It will allow us to build our position in the world's largest markets, and brings the

population of markets we operate in to 2.1 billion people, contributing over 55% of

global GDP."

Tesco, which made a profit of £2bn last year, said the US grocery market is worth

$600bn (£345bn) a year and is expected to grow 40% over the next five years.

The start-up there will be run by Tim Mason, currently Tesco's marketing and property

director.

The company will be entering a market that has proved dismal ground for other UK

retailers. J Sainsbury came a cropper with Shaws supermarkets, while Mark & Spencer

made little headway with its small Kings operation, which it is trying to sell.

"It's clearly high-risk and a bit surprising," Sanjay Vidyarthi, an analyst at brokerage

Teather & Greenwood, told Reuters. "There's a risk in terms of the significant cash

involved. As far as the shareholders are concerned, it suggests the cash is going to

be invested in growth and won't be returned to them."

In morning trading, Tesco was down 2.2% at 319.32p.

Source

[ceriserose 1]

Oooh, I was only in the UK 3 weeks, but I really liked Tesco. Woot that they're starting on the West Coast!

[Sister Fracas 5]

I hope it works out for them so they can work their way eastward!

[Hilarious Clinton 452]

Tesco is in Thailand so my wife ends up calling our Costco, Tesco. So it's already here for me