Tesco PLC’s early troubles in the U.S. are prompting speculation about what the retailer will do next.
Tesco, Britain’s biggest retailer and one of the largest in the world with $75 billion in yearly sales, has opened six Fresh & Easy stores in Orange County with more coming.
But Tesco isn’t planning any Fresh & Easy store openings in the next three months while it retools the stores it already has opened, Simon Uwins, the company’s marketing director, wrote in a recent blog.
The blog followed earlier reports that said Fresh & Easy sales were weaker than expected. Whether it’s business as usual in Southern California’s crowded retail market or a sign of bigger trouble is hard to tell.
After the news, retail consultants said Tesco’s Fresh & Easy stores are unappealing, lacking in variety, “too upscale” for their locations, “nothing special” and “not low priced.”
“They didn’t deliver what they promised,” said David Livingston, a retail consultant in Pewaukee, Wis. They promised Trader Joe’s products at Wal-Mart prices and it didn’t happen, he said. “Consumers rejected it.”
Brendan Wonnacott, a Fresh & Easy spokesman, downplayed the chatter.
Tesco is making adjustments along the way and plans to continue to expand in the U.S., he said. Stores already announced are moving forward, he said.
One store is opening next week and another the following week, he said. But stores will open at a slower pace. It had been opening two to six stores a week, Wonnacott said.
Fresh & Easys are planned for Fountain Valley, Orange, Fullerton and Westminster by the end of 2009. The company doesn’t announce official opening dates until a few weeks out, he said.
Anaheim was Tesco’s first OC store. It also has stores in Orange, Laguna Hills, La Habra, Huntington Beach and Buena Park.
Reports of Tesco’s lagging sales originally came from Mike Dennis, a Britain-based analyst with Piper Jaffray, who based his report on supplier data. He said that Fresh & Easy was looking at six-month sales of $30 million, not the $100 million expected. Tesco hasn’t released any sales reports.
Retail consultant Livingston is skeptical and speculates that Tesco eventually could cut its losses and abandon the U.S. market.
“You can’t take the concept and redo it in a different way,” he said. “The whole thing was flawed from the beginning. No one believed they were going to deliver.”
Paul’s TV Expands
Paul’s TV & Video in La Habra has opened three stores within Living Spaces Furniture stores and will open the next one in the Irvine Living Spaces store. That will make five Paul’s TV stores, including its stand-alone store in La Habra.
Paul’s TV is known for its kitschy TV ads, where Paul Goldenberg, founder and face of the company, declares, “I am the king.” The store sells mostly flat-screen TVs from Mitsubishi Electric Corp. and other makers.
“That’s our bread and butter,” said Babak Ghaznavi, president of Paul’s TV.
Ghaznavi said it was Paul’s TV’s idea to open a store within a store. Living Spaces LLC of Rancho Cucamonga seemed like a natural fit to increase customers for both companies.
“We are seeing customers that we normally wouldn’t see,” he said.
It’s the first time Living Spaces is selling TVs, he said. Ghaznavi declined to disclose the deal arrangements but the two companies split advertising costs.
Paul’s TV takes up 3,000 square feet to 4,000 square feet inside of Living Spaces, which are 90,000 square feet to 120,000 square feet.
Paul’s TV’s location within each store is different, Ghaznavi said.
The TV store has been an OC staple for 50 years. Paul’s TV does especially well for Super Bowl Sunday. Paul’s TV actually begins delivering TVs on Super Bowl Sunday at 6 a.m. Goldenberg said. Free same-day delivery is one of the reasons Paul’s TV has done well, Ghaznavi said.
“When we did a survey with our customers that was the No. 1 reason,” he said.
These days business has slowed a bit, he said. But customers still can get 24 month, 0% financing, he said.
Goldenberg, the face of Paul’s TV, has retired. He’s close to 80 years old, according to Ghaznavi.
“He’s taking it easy, enjoying his money,” he said
Auto Registrations Less Grim
Local auto dealer registrations in February weren’t as grim as January, when registrations, a barometer of new vehicle sales, were down 28.5%, according to the Orange County Automobile Dealers Association.
February registrations were down 18.1% to 10,031. Nearly every brand was down except for Infiniti, Kia, BMW Mini, Mazda, Mitsubishi, Subaru, Saab and Volkswagen.
Mazda was up 9.8% to 247 autos; Volkswagen was up 11% to 191 autos; Mitsubishi was up 6.5% to 131 autos; Mini boosted its registrations 40% to 77 autos; Subaru was up 3.1% to 66 autos; Kia was up 38.7% to 43 autos; and Saab was up 23.5% to 21 autos. Gas prices, the economy and more stringent credit requirements are dampening sales.
The steepest percent drops: Jaguar at 61%, Pontiac at 52% and Buick at 44.4%. These brands typically don’t sell well in OC. Toyota, which sells the most autos in the county, was down 16.7% to 2,391 autos.
On the luxury front, Mercedes was down 16.4% to 608 autos; Lexus was down 21.4% to 569 autos; and BMW was down 23.2% to 530 autos. Mercedes-Benz is reclaiming its lead as the No. 1 luxury brand in OC, after Lexus took the top spot for a few months.
For the year-to-date, auto registrations are off 24.3% compared to the same period last year.
