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In the UK, the Guardian reports that when Tesco unveils its annual results this week, it is expected to concede that its US operation, Fresh & Easy Neighborhood Markets, will not make it to profitability in 2009 as had previously been predicted.

The recession is blamed for the continued red ink.

According to the Guardian, when the Fresh & Easy chain was launched in autumn 207, CEO Tim Mason “said he expected to open 200 stores by February of this year and outlined plans for 1,000 stores on the west coast, stretching from Seattle to San Diego. One vast warehouse and ready meal factory had been built in Segundo, east of LA, and the Fresh & Easy bosses were already looking at another site in the Bay area of San Francisco to serve 500 more of the 10,000 sq ft shops.

“The first signs of a slowdown in the planned rollout of the brand came last spring, and the chain currently operates only about half the stores originally planned by this time. The Fresh & Easy chain has been hit by its location: the three areas it chose for start-up - southern California, Las Vegas and Phoenix - have been among worst hit by the US downturn.”

In addition, the Guardian notes, Tesco misread the marketplace – focusing on fresh foods, private label groceries and an EDLP pricing strategy that together failed to attract shoppers from other venues; Tesco has adjusted its pricing strategy to be more “down and dirty” and focused on specials.

KC's View:
You’d think that in a recession the combination of private label and every day low prices would be a pretty compelling offer – but the problem may be that the Fresh & Easy stores simply were too antiseptic and maybe even (dare we say it?) foreign to capture enough people’s imaginations.

The bet here … though I’m not nearly as confident about it as I used to be … is that Tesco will get it right eventually. But it is going to take a lot more time and money than the folks back in the UK expected.