Tesco is to take on its US rival Wal-Mart in its own back yard by entering the US market in 2007.

After months of speculation as to whether Tesco would set up shop in the country, the retailer revealed this morning that it is entering the US market through the development of a convenience format similar to Tesco Express.

Tesco said that the first stores would open on the west coast, with initial capital expenditure of up to £250m a year, funded through existing resources.

Tim Mason, currently Tesco’s marketing and property director, is moving to the US to head the business.

In May this year, The Grocer revealed that Tesco executives were in the US scouting out possibilities.

Sir Terry Leahy, chief executive of Tesco, said: “This is a tremendously exciting move for Tesco which will add a new leg to our international expansion. The US is the largest economy in the world with strong forecast growth and a sophisticated retail market.”

He added: “It is a market we have researched extensively for many years and over the last year we have committed serious resources to develop a format that we believe will be really popular with American customers.”