Bangers and mash, anyone? British supermarket behemoth Tesco is making its foray into the U.S. this fall, with a grand opening in Los Angeles and other western cities. Under the banner Fresh & Easy, the 10,000-square-foot stores will cater to health-conscious shoppers, people on the go, and a variety of budgets. Investors may want to take a closer look.
Downtown Los Angeles -- once known for its poverty, but now booming with the development of lofts -- will host one of the first stores. The nearest competing supermarket will be several miles away.
While most markets carry up to 10,000 items, Fresh & Easy will offer only about 3,000. Its focus will be on healthy foods and prepared meals for busy people. How healthy? According to a Barron's article, the stores won't even carry cigarettes.
Tesco has 3,263 stores worldwide, with 1,988 of them in Great Britain. Other operations are scattered far and wide: China, the Czech Republic, Hungary, Ireland, Japan, Malaysia, Poland, Slovakia, South Korea, Thailand, and Turkey. Not counting its stores in the U.S., Tesco plans on opening 75% of its new stores outside the U.K. It's truly a global company, and it thrives wherever it goes.
That continued success is a result of conducting extensive market research before entering a new area. Before the Los Angeles move, Tesco went as far as opening a model store in an L.A. warehouse. Executives kept things secret by telling contractors they were using the site to shoot a movie.
Tesco does quite well going head-to-head with Wal-Mart
He's no doubt aware that revenues and earnings per share have grown 11% a year since 2002. With the British pound valued at more than 2-to-1 against the dollar, U.S. investors have seen a 200% gain since 2003. And don't forget that nice 2.45% dividend yield.
Tesco could be an appealing long-term hold. While baby boomers age in developed countries, Tesco is making a name for itself in emerging markets in Eastern Europe and Asia. Shareholders might just be able to sit back and watch Tesco eat the competition's lunch.
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At the time of publication, Fool contributor Holmes Osborne held shares of Tesco for his clients. Wal-Mart and Berkshire Hathaway are Inside Value recommendations. Berkshire Hathaway is also a Stock Advisor pick. Fool fun facts are located here.