"I come almost every other day," said Lisa Pollinger of Rossmoor, who spent about $25 on assorted groceries at the Spring Street store. "I like the packaging and the sizes and the quality of the meat and produce."
Susan Savage of Long Beach said the store was clean and easier to navigate than a traditional grocery store. "It is just less confusing."
Fresh & Easy could become a success, said Willard Bishop, a retail strategy and marketing consultant in Barrington, Ill., but it's going to take some work. The management must be patient and work to better understand and fix what's gone wrong, he said. He estimated that the stores were doing $60,000 to $70,000 a week in sales, instead of the $200,000 investors had expected.
Since the chain opened Nov. 1, Fresh & Easy has suffered from supply problems, it's battled with labor unions and neighborhood groups, and it has developed a reputation for arrogance in dealing with its vendors.
And a judge recently ruled that a massive Riverside County warehouse that is the hub of Tesco's multi-state distribution network did not have the correct environmental approvals and could be shut down barring a successful appeal or mitigation agreement.
The entire venture, about $700 million of investment, is "miles off target," said a report by Mike Dennis, a senior analyst at the London office of investment firm Piper Jaffray & Co.
The stores are averaging a 70% decline from expectations, Dennis wrote in a report to investors.
Even before learning of the suspension of openings, Dennis believed the chain had to be anxious about its early performance. "Tesco must be concerned that the Fresh & Easy concept is not right and that they need to quickly find out what the issues are," he wrote.
The grocer has already made a couple of changes to its business plan, such as taking American Express cards and adding to its selection of prepared foods. It named Jeff Adams, an American who formerly headed Tesco's stores in Thailand, to an undisclosed executive position to strengthen the management team as it considers more expansion.
Dennis believes Adams will be the No. 2 executive at the chain and will be responsible for figuring out what's gone astray and how to fix it.
Tesco, the world's third-largest retailer, has spent years researching how to crack the U.S. market and has committed to spending $2 billion over five years to make it work.
