Tesco plans to slash its spend on new stores and refits in the coming year despite posting a record annual profit of more than £3 billion.
The supermarket giant this week revealed its total capital expenditure for 2008 hit £4.7 billion – a figure it plans to “reduce substantially” this year to about £3.5 billion.
In its results for the year ending 28 February, the group admitted: “We are now reducing UK capital spend on large mixed-use development schemes… allowing UK capital expenditure to revert to the levels of four years ago.”
It said despite reducing spend, the group was still aiming to add between six and seven per cent to its floor space in the UK during the year, and a further nine per cent to its floor space globally. This is equivalent to the construction of more than 8 million sq ft of new space.
Tesco said that substantial falls in site and build costs, particularly in the US market, would allow it to substantially reduce its capital spending while still continuing with expansion.
The group said: “Indirectly, our investment in new stores, refits and extensions will sustain more than 7,300 jobs in construction, maintenance and related areas.”
According to Tesco’s results its UK capital expenditure for 2008 was £2.6 billion, with international spend in Asia, Europe and the US a combined £2.1 billion.
The total amount the group spent on expanding its empire, including business acquisitions, was £6.6 billion which it said was funded from a “strong, property-backed balance sheet”.
The group said it was also significantly increasing the level of spend in energy-saving projects, include new refrigeration and lighting.
Tesco completed a total of 2 million sq feet of floor space last year, bringing its total number of stores in the UK to 2,282.
Chief executive Terry Leahy said: “We have delivered a solid sales and profit performance, both in the UK and internationally, whilst continuing to invest in our long-term strategy for growth.
“We have made a good start to the new financial year and I am confident Tesco will continue to make good progress even in the current global economic environment.”
The group recorded sales of £54.3 billion for the year, while its underlying pre-tax profits set another milestone, climbing 8.8 per cent to £3.13 billion.