Tesco ................

[StupidCowboyTricks]

Tesco Will Enter U.S. by Opening Convenience Stores (Update11) Feb. 9 (Bloomberg) -- Tesco Plc, the U.K.'s largest retailer, will enter the U.S. next year by opening convenience stores on the West Coast to challenge 7-Eleven Inc.

The outlets will be based on the retailer's Tesco Express format in the U.K., Chief Executive Terry Leahy said today in an interview. Cheshunt, England-based Tesco plans to spend as much as 250 million pounds ($435 million) a year to add to the business.

Tesco, prevented by planning restrictions from expanding its U.K. supermarkets, is opening stores in China, Hungary and Turkey. Competition from Wal-Mart Stores Inc., the world's largest retailer, has kept U.K. chains from gaining market share in the U.S. J Sainsbury Plc abandoned the U.S. by selling West Bridgewater, Massachusetts-based Shaw's Supermarkets in 2004.

``The U.S. has been a graveyard for U.K. retailers, so investors are a little cautious,'' said Stuart Fraser, who helps manage $28 billion as a director at Brewin Dolphin Holdings in London and holds Tesco shares. ``It could be that it wants to get a flavor for the market through a small operation and then make a massive acquisition to get instant size.''

Shares of Tesco fell 6.5 pence, or 2 percent, to 320.5 pence in London. The stock gained 3 percent in 2005 as Wal- Mart, the world's largest retailer, dropped 11 percent. The U.K. company has a market value of 25.2 billion pounds ($44 billion), less than a quarter of Wal-Mart's size.

Overstretched?

The move into the U.S. will mark Tesco's second expansion into a major economy in less than two years. The retailer entered China in 2004, following Wal-Mart and Carrefour SA. Tesco now operates in 12 countries outside the U.K. and has 2,365 stores worldwide. Half of the company's floor space is outside the U.K.

``It only just entered China, and there's plenty to do there, so there's concern the management may get stretched,'' Fraser said.

Tesco Express stores are located in town centers and at gas stations and sell goods such as bread and prepared meals. The stores are aimed at workers who have less time to shop and prepare food. Convenience retailing is one of the fastest- growing parts of the U.K. food industry, worth 23 billion pounds ($40 billion) a year.

``We'll open quite a few stores in 2007 and hope for pretty rapid expansion,'' Leahy said, though he declined to be more specific about the format and what goods will be sold. ``We hope we will be giving U.S. consumers something new and different.''

`Clever Move'

Analysts including Jonathan Pitkanen at Fitch Ratings predict Tesco might open as many as 200 stores for the 250 million pounds a year it is planning to spend, subject to planning approvals.

The company expects the U.S. operation to break even by the end of its second year, Leahy said. Marketing Director Tim Mason will head the U.S. expansion.

``It's a clever move,'' said Richard Perks, an analyst at Mintel International in London. ``It won't be going head to head with Wal-Mart, but operating a complementary business where you can do a top-up shop and buy everyday essentials there, and then do your full monthly shop at Wal-Mart.''

Wal-Mart has a ``relatively minor'' presence on the West Coast, according to Citigroup Inc. analyst David McCarthy. The Bentonville, Arkansas-based retailer has 266 stores in total in California, Oregon and Washington. In Texas alone, Wal-Mart operates 415 stores.

Richest State

The U.K. retailer is starting off on the West Coast because it has a ``big population and a growing economy,'' Leahy said. ``We felt an organic approach was needed to the U.S., rather than through doing a major acquisition, because we want to give shoppers something that's not currently available.''

California is the richest state in the U.S., and its economy make up 13 percent of the country's gross domestic product. The state's economy is the same size as Italy's, worth about $1.6 trillion in 2004, according to the U.S. Commerce Department.

Tesco controls more than 30 percent of the U.K. grocery market and is looking abroad as it faces planning restrictions at home and calls by neighborhood store owners for its expansion to be curbed.

The company agreed in September to swap store chains in Central Europe and Taiwan with Paris-based Carrefour, Europe's largest retailer, after expansion left both companies overextended. The decision was the second time Leahy has quit an overseas market, having pulled out of France in 1997.

Analysts including Bryan Roberts of Planet Retail said Tesco may open higher-end convenience stores in the U.S., rather than take on discounters such as Supervalu Inc.

Dallas-based 7-Eleven opened its first store in 1927 and now has more than 27,900 outlets globally, making it the world's largest convenience retailer. More than 20 percent of them are based in the U.S. and Canada, according to the company's Web site.

Separately, Fitch Ratings said Tesco told analysts today that its property contains ``hidden'' value, adding to speculation about sale-and-leaseback transactions and a return of capital to shareholders. Discussions with investors will take place in April, Fitch said in an e-mailed note, citing Tesco.

The U.S. expansion will have little immediate financial impact, Fitch said in a statement released on its own news wire.

[123cat]

Good for u.s consumers (price not choice) bad for tesco, bad for walmart, bad for the environment, bad for small producers (as a pair and as an industry). in every £8 spent in the U.K. £ is spent in TESCO. grow your own, even a window box, taste it.

[123cat]

sorry, £1.

[123cat]

by no means overstretched, a very sound business, the only way they may fail in the U.S. is by not having a strong enough grip on the political dimension.

[StupidCowboyTricks]

123cat wrote: by no means overstretched, a very sound business, the only way they may fail in the U.S. is by not having a strong enough grip on the political dimension.


So in the UK do they have mini Tescos?

I know from previous boards Tesco does a lot of business in the UK.

[123cat]

in one road near me they have 10 small stores. their march has been blamed for the demise of the independent corner shop. No small feat, remember the British were once refered to as a nation of shop-keepers.

[123cat]

Fulham Road, London.