Tesco Approaching 120 Fresh & Easy Stores, Despite Challenges

(MoneyWatch)  Despite experiencing some bumps in the road, Tesco's Fresh & Easy operation is poised to reach 120 stores in the United States by the time the company's financial year ends in February, which puts it about a third of the way to profitability.

Based on earlier company comments, Tesco needs to operate between 300 and 500 Fresh & Easy locations to make its distribution system, including stores and a state-or-the-art warehouse in Riverside, Calif., a money maker. Yet, getting to that range has been a bit more challenging than the British retailer originally anticipated.

Last year, Fresh & Easy paused in its expansion to retool merchandising. Its bare bones approach to store decor didn't please some potential customers in the markets where it operates, now stretching from Northern California to Arizona. It also tweaked its assortments, moving away from trendier items, such as steak and blue cheese sandwiches, and introducing more American favorites, such as meatball subs.

The economy also took a toll. Spokesman Brendan Wonnacott said Fresh & Easy originally planned a store opening push for the latter half of the current fiscal year but decided it would be "prudent" to maintain the same store-opening pace it set last year, one to three stores a week. Of course, while poor in most of the U.S., economic conditions have been particularly trying in the Southwest where the bursting housing bubble has had a particularly destructive effect.

Just after the New Year, Fresh & Easy launched a line of 98 cent produce packs. Contents of the six-item packages will change regularly but can include apples, oranges, peaches, tomatoes or just about any other mainstream, abundant item. They were developed to provide a fresh but inexpensive alternative to the canned fruits and vegetables customers have turned to as the economy eroded. After all, fresh is part of the retailer's name and important to its image. The product packs also represent another step away from trendy to more basic food items, and a deliberate turn from affluent consumers, originally part of Fresh & Easy's wide ranging customer aspirations, and toward the middle of the middle class.