TESCO BOSS SIR TERRY LEAHY ON TOP OF THE WORLD AS US LOSSES PEAK
Sunday January 9,2011
Richard Northedge
Tesco is looking east after riding out a storm in the US, Richard Northedge says
http://www.express.co.uk/posts/view/222054/Tesco-boss-Sir-Terry-Leahy-on-top-of-the-world-as-US-losses-peak

LOSSES have peaked at Tesco’s audacious US venture Fresh & Easy, says Sir Terry Leahy, clearing the way for the highly lauded chief executive to retire in March with his house fully in order.
Retailers such as Sainsbury’s and M&S expanded into America and retreated hurt, but this did not deter Leahy from taking the UK’s largest retailer across the Atlantic. Like his rivals, however, he is finding it hard going.

“We opened at an unfortunate time,” he says. “It was right at the epicentre of the financial crisis.” However, he is redoubling his effort rather than running away and forecasts that the US venture will break even in 2013. “Losses have peaked,” he says defiantly.

Leahy does not do defeat. He has taken Tesco into clothes, petrol, insurance, electricals, recorded music and film, not to mention its own internet and cell-phone services. His 31 per cent share of the UK food market already means one pound in every seven spent in Britain passes through Tesco, which is now starting its own bank to challenge the financial giants.

He has expanded into 14 other countries, from Europe to the Far East. Half of his 5,000 stores are outside Britain and employ nearly 500,000. His F&F clothing brand is already market leader in Hungary and the Czech Republic. “Of the countries that we have gone into, we’ve reached No 1 or No 2 positions,” he states.

Except in America. While Tesco has twice the market share of Wal-Mart’s Asda chain in Britain, it has been hard to win share in the US. Leahy, 54, opened his first Fresh & Easy store in California in 2007 and planned 500 stretching into Nevada and Arizona. The start was late and slow, however, and before Leahy got even half way to his new target of 400 shops he had started closing branches.
“It’s not helped by having a number of stores that opened in the housing-bust areas, which were then at fairly high rents, where you’ve seen depopulation, not population growth. The leases were taken right before the crunch. Some are a bit expensive.”

He blames the losses on the big start-up investment but fixed costs, such as owning the factories that make a third of Fresh & Easy products, mean extra sales should quickly reverse its fortunes. “We can see our way clear through,” he insists. “That’s why we’re able to say losses have peaked.
“We are not going to become the No 1 retailer in the US but we can be a significant business in the convenience stores market and that’s a very big niche in a place like the US.”

Leahy’s background means he knows what shoppers want. He grew up in social housing in Liverpool in the Sixties. Unlike his three brothers who left school at 16, Leahy stayed on, went to university, joined Tesco at 23 and worked his way from shopfloor to become chief executive in 1997.

When he joined, Tesco piled its goods high and sold them cheaply. Moving it upmarket means its Finest range of quality foods is now Britain’s biggest brand and its low-price Value range is the second biggest.
Leahy’s big contribution to the revamp was the Clubcard, which gives shoppers loyalty points.

He is confident of the worldwide economy, saying consumer sentiment is recovering. “In China there’s all to play for. Tesco can emerge as one of the leading retailers. The same would be true of India, but it will take longer there,” he says.

He already has almost 100 stores in China and is rapidly adding more, building big retail centres with Tesco as the anchor.

“There’s not been a standard of shopping like that before. We’re seeing good growth and it’s broad-based. That bodes well for a breakthrough into profitability.

“I think there’s more to come in that part of the world. Tesco in Korea could be as large as Tesco in the UK.”

It won’t happen in Leahy’s reign. He plans to retire in March, and intends to spearhead a regional growth plan for Liverpool.

After he goes, his lifetime commitment to Tesco won’t be broken. “I’ll remain a keen shopper and keen shareholder. I’m Tesco’s biggest fan,” he says.