TESCO could open hundreds of stores in America next year after the UK’s biggest supermarket group revealed plans to launch a convenience store chain on the West Coast .
Shares in Tesco slid 1.9 per cent to 320½p as analysts were shocked by the move after months of denials that the supermarket planned acquisitions in America.
Some analysts also expressed fears that Tesco was adopting a risky strategy, given its recent expansion into China and Japan and the difficulties that many British retailers have faced in America.
Sir Terry Leahy, chief executive of Tesco, said that the group intended to build a new convenience store chain in America organically from next year and no acquisitions were planned.
The group intends to spend £250 million a year on the project, based on the Express convenience store format in the UK, and expects to break even by the end of the second full year of operation. It would be funded from existing resources.
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Sir Terry said: “I believe unless we bring something new to the party we are not going to be successful. It needs to be new and different.”
He added: “There is a lot of upside in organic growth and this is not a huge acquisition. We are not betting the company and I am confident about the format and comfortable with the risk.”
He admitted that Tesco had picked the West Coast of America to launch its chain partly because this was an area where Wal-Mart, the world’s largest retailer, was less prevalent. However, he said: “The West Coast on its own is one of the world’s largest economies and we are addressing the need for convenience. Everyone has a lifestyle with a shortage of time, there is spending power and these all suit us.”
James Walton, an analyst at IGD, the grocery distributors’ association, said that the West Coast of America was particularly notable for its fragmented convenience store market. The region is home to the three states with the highest percentage of one-store owners — Washington, Oregon and California.
Tim Mason, currently Tesco’s marketing and property director, is to move to the US to run the business, along with a team of about 15 people.