El Segundo-based Fresh & Easy struggles
Madeline Dovale likes shopping at Fresh & Easy for the sandwiches and pre-made foods, especially the ones with sauces. And she likes the fact that she can get through the self-checkout line quickly.
“I can do everything quickly,” Dovale said. “As you can see, there’s not long lines.”
The lack of long lines is something the company hopes changes— and quickly.
Fresh & Easy’s British parent company, Tesco, is coming under pressure from shareholders to dump the mid-sized supermarket chain. Fresh & Easy is based in El Segundo with more than 200 employees in its corporate headquarters off Rosecrans Avenue. Key shareholders want Tesco to focus on its British operations and sell off Fresh & Easy, which has been underperforming since it was launched five years ago.
Industry analysts say Fresh & Easy may never generate the revenue it was projected to bring in.
“I think it (Fresh & Easy) has got the possibility for success, but I think they handicapped their ability to succeed by setting their expectations for success too high too early,” said Jim Hertel, a managing partner at food retail consulting firm Willard Bishop.
When the stores were rolled out, the company said it expected to make $200,000 a week from a 15,000-square-foot store.
“That was a big number and it hasn’t materialized,” Hertel said. “They’ve made mistakes and haven’t recovered.”
Fresh & Easy has 151 stores in California and 45 in Nevada and Arizona.
Tesco opened Fresh & Easy in late 2007, publicly announcing that it planned to invest $2 billion to open hundreds of stores in California and the Southwest.
Hertel said the rollout was too large and done too quickly. California has proven a tough battleground for Fresh & Easy, with the weak economy and highly competitive grocery store market.
The supermarket chain has not turned a profit and disappointed shareholders of Tesco, which issued a profit warning in January for the first time in nearly twenty years. Tesco’s troubles have prompted its fourth- and fifth-largest shareholders to call for dropping Fresh & Easy in the hopes of stabilizing Tesco’s British operations.
Fresh & Easy says sales are rising, and that it’s going to break even when its fiscal year ends in February 2013.
“We have a clear target for break even, and in January we reported that we have continued our strong run of form,” a company spokesman said in a statement. A recent Tesco financial statement said Fresh & Easy made good progress during the Christmas season, with sales growth at 19 percent.
The stores sell a variety of foods, including meats, wines, organic produce as well as household items and prepared meals at modest prices. The chain’s brand products do not have artificial colors, flavors, added trans fats or high-fructose corn syrup, and use preservatives when necessary only.
Customers at the El Segundo store off Rosecrans Avenue hope the company rebounds.
“I like the selection — it’s not as crowded and it’s really convenient,” said Anastasia Gavlin, who also shops at the Fresh & Easy in Hermosa Beach.
Dovale, who appreciates the short checkout lines, is like other customers in that she also shops elsewhere.
“I shop here, I shop at Trader Joe’s. I shop at Vons sometimes because it’s closer to my house. Sometimes I go to Ralph’s,” Dovale said. “I’ve gotten used to coming here and I actually like this store in many ways. They don’t have everything that I want, but they have a lot of things that I want. I’ve gotten used to a lot of their food. I love it. They have the stuff I know I can depend on. I would hate to see it go under because I think it’s a great store.”