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Stock Strategist

Are Supermarkets Bracing for a British Invasion?

America's Whole Foods and Britain's Tesco are invading each other's turf.

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This is shaping up to be an interesting year for international supermarket expansions. At the beginning of June,  Whole Foods (WFMI)--one of our favorite retailers and a bargain at the current stock price--opened an 80,000-square-foot store in Kensington, a well-heeled area of London. In late autumn, Britain's supermarket powerhouse Tesco will make its first forays into the U.S. with a new chain of neighborhood markets in California, Arizona, and Nevada called Fresh & Easy. We like both firms' chances for success, but think Tesco's U.S. effort has more disruptive potential.

Supermarkets and the Home Turf Advantage
Food retail is an intensely local affair, making it difficult for foreign firms to crack new markets. International supermarkets like Carrefour and  Royal Ahold (AHO) have had mixed results outside their home markets of France and the Netherlands, respectively.  Wal-Mart (WMT), the world's largest retailer, has done well in Latin America but recently beat an ignominious retreat from Germany and South Korea.

Mark Weber has a position in the following securities mentioned above: WMT. Find out about Morningstar’s editorial policies.