FINANCE

Tesco Expands Across China’s East Coast

BY CSA STAFF

Chesthunt, England Further supporting its global-expansion strategy, Tesco plans to open stores in the Chinese provinces of Shandong and Fujian next year, according to a presentation on the grocer’s Web site. The move will give the grocer more breadth across the entire length of China’s eastern coast.

The supermarket chain currently operates 11 stores, including five hypermarkets in the capital of Shenyang, the tenth-largest city in China.

Looking ahead, Tesco is planning a “strong program” of store openings for 2009, according to the presentation. The chain, which already operates locations in the northeast province of Liaoning, plans to open stores in all 14 of Liaoning’s cities, the report said.

Tesco’s Chinese business has doubled since 2004, but it is still a small portion of corporate sales. The division reported 702 million pounds ($1.1 billion) in the fiscal year ended Feb. 23, out of a group total of 51.8 billion.

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Small formats have big future at Wal-Mart

BY CSA STAFF

BENTONVILLE, Ark. —Wal-Mart hasn’t discussed expansion plans for its new Marketside stores, but the company has indicated small-format stores will play a much bigger role in its future.

The average size of new supercenters is shrinking to a range of 140,000 square feet to 170,000 square feet, compared to 195,000 square feet just a few years ago. By opening smaller stores capable of achieving comparable sales volumes through supply chain efficiencies and reduced product assortments, Wal-Mart can make more efficient use of its capital.

The reduction in supercenter size comes as the company further reduces the planned number of new units. But as supercenter growth decelerates, Wal-Mart looks to tap growth opportunities with small stores. It has identified 15 large-opportunity markets where it has a limited presence and, according to U.S. Stores division president Eduardo Castro-Wright, could achieve enormous sales potential.

“If we had the same market share in those 15 opportunity markets as in the rest of the U.S., it would represent a larger opportunity than exists in India and Russia combined,” he said. “It is a very significant opportunity for us and one you will see us invest more in, in the future.”

Wal-Mart’s problem is that it doesn’t have the right vehicle to reach those markets, which explains why the 15,000-square-foot Marketside was developed. However, Wal-Mart’s global portfolio includes numerous small formats that could be modified to serve U.S. consumers in densely-populated markets.

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Post-election outlook shifts to: Expect worse, hope for best

BY CSA STAFF

NATIONWIDE RT REPORT —During a year in which predicting retail performance for the all-important holiday selling season has begun to resemble a game of pin the tail on the donkey, a blindfold is only one of the challenges now facing sales forecasters. Much like an anxious donkey with an acute case of A.D.D., the economy keeps jumping up and down, and with it goes the mood of many forecasters—one day talking of Armageddon, the next day pointing to signs of hope.

Bringing a slight ray of optimism to the picture are two important factors that have suddenly surfaced: the precipitous drop in fuel costs, both at home and at the pump, and the recent resolution to the presidential election, which many believe has been the greatest contributing factor over the last 18 months to indecision and lack of consumer confidence.

The fact that fuel costs, long considered a bellwether of consumer spending potential, are even mentioned in economic circles these days hinges on the sudden and dramatic effect they are having on consumers’ pocketbooks. Where the national average for a gallon of regular, unleaded gas ran as high as $4.11 at the height of the summer travel season back in mid-July, the current national average (as of Oct. 30) is down more than 37% to $2.55, and is expected to continue to drop. For the millions of Americans who rely on their vehicles each day, especially those who have grown accustomed to budgeting $4-per-gallon fuel expenses, this economic dynamic equates, simply, to more cash in hand.

However, other elements fighting for mindshare of the consumer psyche these days include joblessness, personal savings and the much-maligned federal economic bailout, which have led to an all-time low in consumer confidence last month, as reported by the Conference Board. In October, the group reported that confidence had dropped to 38 basis points, down from 61.4 in September (the survey’s baseline of 100 was set in 1985).

Many economists have speculated, however, that this consumer trepidation is only partially attributed to real fear. Instead, they point to the presidential election, particularly the campaign rhetoric, which essentially bombarded voters with a message about how bad things have become. “It’s badly broken,” both candidates chimed, “And I’m the man to fix it.” It stands to reason, therefore, that with the election over, that message will now change considerably, shifting from one of negativity to one of constructive, pro-active planning. And this, the thinking goes, will alleviate, if for nothing else, the indecision that has occupied consumers’ minds.

In late October, for example, when many reputable national polls reported that Barack Obama had taken a sizeable, mostly insurmountable lead over John McCain, consumer confidence began to stabilize ever so slightly, and at least in one case, it began to show improvement. According to the weekly ABC News Consumer Comfort Index, which uses a scale of -100 to +100, consumer confidence for the week immediately prior to election week saw a slight uptick in confidence (to -49, from -50), and despite all of the negative economic news, did not drop under its record low of -51 set in May, when news of rising fuel prices dominated the news.

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