Tesco accelerated expansion prompts response from rivals

RIVERSIDE, Calif. —When Tesco opened its first stores in Los Angeles last December, it said it would have 50 Fresh & Easy outlets opened by the end of February. And it reached that goal last month, with time to spare.

Tesco opened its 50th store in Palm Desert, Calif., on Feb. 20, and had more openings in the pipeline for the final week of the month, putting it ahead of what’s already an ambitious schedule. The chain now expects to have up to 300 of its 10,000-square-foot Fresh & Easy stores in California, Arizona and Nevada by the end of 2009, with stores already in such major markets as Phoenix, San Diego and Las Vegas.

The British chain said it has more than 140 confirmed locations for stores due to open in the next year, including about 18 in the Bay area, a region Safeway has dominated for years. Tesco plans to open its first stores there in early 2009, in cities that include San Francisco, Oakland, Walnut Creek and Concord.

And it’s reportedly looking to roll out Fresh & Easy stores in the Chicago area, according to a report published last month in the Chicago Sun Times. The newspaper cited a “knowledgeable source” as saying Tesco could offer Chicago, “something unique because of its strong offering of prepared foods, packaged perishables and selection of produce, meat and bakery.”

Tesco didn’t comment on the report and has said it plans to limit expansion to the West Coast in 2008. Though it hasn’t released financial results for its U.S. stores—and doesn’t plan to this year—Tesco executives have said that they’re “very pleased” with results so far.

The rapid rollout of Fresh & Easy stores is already prompting a response from rivals. Wal-Mart plans to open three, 15,000-square-foot Marketside grocery stores in the Phoenix area this spring. The stores will be less than half the size of its 40,000-square-foot Neighborhood Markets, a 130-store chain that’s the smallest format Wal-Mart has. Safeway is also considering the launch of smaller format stores in Northern California to respond to Tesco’s move into that territory.