LONDON — Tesco plc is hoping it has better luck in the U.S. with fashion than it did with food.
Tesco has unveiled plans to open seven stores for its F&F mass-market clothing line on the East Coast of the U.S. this year, through a franchise partnership with Retail Group of America. The retailer said the move is part of its plans “to become a leading global brand for affordable fashion.”
The move to expand F&F in the region comes after Tesco exited American food retailing last year, after opening grocery stores under the Fresh & Easy banner in 2007. Tesco said it would pull out of the U.S. market after a severe contraction in its 2012-13 profits. In September, Tesco agreed a sale of a “substantive part” of the Fresh & Easy business to YFE Holdings Inc., an affiliate of Yucaipa Companies LLC. The retailer said the move was in line with its focus on the “disciplined allocation of capital” to markets with significant growth potential and the opportunity to deliver strong returns.
Freddie George, retail analyst at Cantor Fitzgerald Europe Research in London, said he thought it “unlikely” that Tesco’s F&F venture would succeed in America. “I think [Tesco] are clutching at straws; they’re trying to come up with ideas to underpin their share price,” he said. The supermarket chain has seen its shares fall 11 percent since the beginning of the year to 2.89 pounds, or $4.83, and its annual results, set to be reported Wednesday, are expected to show a decline in profits. The retailer, once one of the fastest-growing in the U.K., has found itself caught between supermarkets that are heavy discounters and more upmarket players such as Marks & Spencer and Waitrose. Tesco also has been saddled with superstores at a time when smaller store formats have been gaining ground.
“I don’t think the range will have much appeal [in the U.S.] You need to have at the very least a good, better, best [model], but they are just F&F, it’s just a range that goes into supermarkets,” said George. “My view is that they will really struggle. In the U.S. there are a lot of value retailers. Tesco failed with food [in the U.S.], so that’s not a good omen.”
Tesco is clearly looking at the success in the U.S. of another food-retail bred fashion line, Joe Fresh, which is owned by the Loblaw supermarket chain in Canada controlled by the Weston family. Joe Fresh has been aggressively opening freestanding stores in the U.S., is now eyeing overseas markets and has an agreement to open stores-in-stores in J.C. Penney units.
Tesco said its first F&F Store will open in Holyoke Mall, in Holyoke, Mass., in May. That will be followed by openings in four malls in the New York area — Palisades Center in West Nyack, N.Y.; Trumbull mall in Trumbull, Conn.; Sunrise mall in Massapequa, N.Y., and South Shore mall in Bay Shore, N.Y. — and then at the Patrick Henry Mall in Newport News, Va., and the Exton Square Mall in Exton, Pa.
Jason Tarry, chief executive officer of F&F, said, “We’ve had a really positive response from customers in all of our overseas markets so we’re hoping our American stores prove to be just as popular,” he said, noting that F&F has franchise stores in 10 countries, with “more planned for the future.”
Simon Marshall, chairman of Retail Group of America and ceo of Fawaz Al Hokair & Co. in Saudi Arabia, added, “With New York being the shopping capital of the world, it’s a great opportunity to present a great brand to discerning customers in the biggest retail market on earth,” he said. “We look forward to growing our presence with F&F in a number of key markets and presenting F&F to the American consumer.”
Tesco also said that through its partnership with Al Hokair in Europe and Central Asia, F&F has opened a store in Armenia’s capital, Yerevan, adding to stores in the region in Saudi Arabia, Kazakhstan and Georgia. The first F&F stand-alone store was opened in Prague in 2010, and the retailer has F&F stores in countries including the U.K., Ireland, Thailand, South Korean, Jordan and the UAE. It also delivers to over 30 countries including the U.S., Australia, South Africa, New Zealand and Canada.