Tesco's Fresh & Easy expanding product selection

Los Angeles Fresh & Easy, the U.S. arm of Tesco, is making major changes in its Fresh & Easy stores, Reuters reported. In what the company is terming an "evolution,” Fresh & Easy will add about 1,000 items to its current 3,500-product assortment.

"This isn't about changing the concept of Fresh & Easy," Tesco spokesman Jonathan Church said, according to the report. "What we've got to do is fine-tune the model for the customer we have before us today."

The move comes just weeks after Tesco said Fresh & Easy had a bigger-than-expected loss of 142 million pounds ($220 million) in the fiscal year ended in February. But it affirmed its commitment to the chain, which has 120 stores in Southern California, Las Vegas and Phoenix.

Analysts are concerned that this latest announcement from Tesco suggests that the Fresh & Easy concept continues to be problematic. And many believe that Tesco’s problems in the United States might set a precedent for its plans to expand in China, India and Japan and other countries around the globe.

"There is absolutely no guarantee that Tesco will be able to 'crack' any of these markets," Morgan Stanley analysts said in a recent note, "and the (admittedly limited) evidence to date suggests to us that there is a very real risk that Tesco could destroy a great deal of shareholder value in trying."

Fresh & Easy's early plans called for 200 stores in the United States by February 2009. The chain now expects to open its 200th location by November 2010.