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    Fresh & Easy Suffers Setbacks During Rollouts

    Court rules its distribution center does not comply with an environmental planning law, while newly opened stores suffer a technology glitch that failed to inform employees of out-of-stocks.

    EL SEGUNDO, Calif. -- Tesco's U.S. arm was dealt a legal obstacle last week, when a California court ruled its main warehouse here did not comply with an environmental planning law, the Financial Times reported.

    Company executives stated the ruling by Riverside County Court could, in theory, lead to the facility's closure, and added it was highly unlikely and that similar disputes were settled without such radical measures, the Times reported. The case was filed by Health First, a organization established with the support of the United Food and Commercial Workers union, a group that recently has been protesting Tesco over union representation.

    "It is just the latest round in an ongoing court case," Simon Uwins, marketing director for Fresh & Easy, told the Times. Uwins noted Tesco had contingency plans in place to deal with any potential distribution difficulties.

    Health First argued that the distribution facility should have been subject to a full environmental review, including a public consultation, and was concerned about increased traffic from distribution trucks, the Financial Times reported.

    Tesco argued that the center, which is located on the site of a former military base, is covered by the environmental approvals secured for the base redevelopment, the report stated.

    "We will review the ruling to understand what further compliance might be necessary but there is nothing in the ruling handed down that we believe will affect the operation or further rollout of the business," Tesco said in a statement cited by the Financial Times.

    The company already opened 15 stores in the U.S. and plans to have 50 open by the end of the year, with plans slated to have 200 stores operating by the end of 2008, according to the report.

    Meanwhile, six Fresh & Easy stores in California suffered out-of-stocks as a result of its information technology system, which did not recognize the need to restock shelves, Contractoruk.com reported.

    The monitoring system failed to calculate "low"-stock situations because the newly opened stores didn't have enough historical data for comparison, the report stated.

    In other Tesco news, the company unveiled ambitious U.S. expansion plans that call for the retailer's Fresh & Easy stores to be so prevalent, a customer in the urban centers it targets will never to be more than a mile from one of its stores, Reuters reported.

    "We want the stores to be no more than two miles apart so no one has to travel more than a mile to get to a Fresh & Easy," Fresh & Easy CEO Tim Mason told Reuters.

    To accomplish this, the company plans to open a second distribution centre in the northern California town of Stockton, which could serve up to 500 stores, the report stated.

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