NEW YORK -- Rumors were sparked last year about whether Tesco was eyeing U.S. grocery chain Albertsons, but the British retailer later said “no thanks.”

Last week, Tesco, the United Kingdom’s leading retailer confirmed its expansion plans with an announcement that it is indeed making a play for the United States--a move some industry observers are predicting will have “giant implications” for stateside convenience and grocery stores, reports Progressive Grocer.

According to Tesco, the retailer “intends to enter the United States through the development of a new convenience format, beginning on the West Coast in 2007.”

“This is a tremendously exciting move for Tesco, which will add a new leg to our international expansion,” Tesco Chief Executive Sir Terry Leahy said in a statement.

“The United States is the largest economy in the world, with strong forecast growth and a sophisticated retail market. It is a market we have researched extensively for many years, and over the last year we have committed serious resources to developing a format that we believe will be really popular with American consumers. We’ve put a strong team together, led by Tim Mason and drawing on the wealth of skills and experience within the group. The first stores will open on the West Coast in 2007,” Leahy said.

The New York Times writes that Tesco “surprised investors with its plan to spend up to $435 million annually to establish the American stores.” The newspaper adds that Tesco “declined to specify the number of stores it planned to open,” but said it expects to break even on the project “by the end of the second full year of operation.”

Frank Badillo of the Ohio-based consulting firm Retail Forward told Progressive Grocer that Tesco’s latest move is “ingenious”--particularly where Wal-Mart is concerned. 

“It would be hard for Tesco to take on Wal-Mart head-on in the U.S.,” Badillo told the news source, adding, “Instead they're targeting a format that Wal-Mart isn't strong in, but one that Wal-Mart is looking to get more into--smaller, convenience-driven stores like Wal-Mart's Neighborhood Market and other prototypes Wal-Mart has tested.”

Badillo also predicts that Tesco’s U.S. market presence will undoubtedly affect the grocery industry. “It's another factor that will accelerate the trend of smaller independent supermarkets going out of business," he told the news source, adding, “It also spells for the convenience store industry another step in the ultimate shakeout of the industry, which, like the supermarket industry, tends to be dominated by smaller, independent chains."

Meanwhile, Tesco spokeswoman Jana Matouskova told the Associated Press on Friday that the retailer purchased 27 stores in the Czech Republic from Germany-based Edeka Zentrale AG, a move that would “solidify Tesco's position as the fourth-largest supermarket chain in the country.”