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Winning construction work: Supermarkets

Retail may be suffering overall but the grocers are keeping up with their expansion plans

The retail sector overall has taken a bashing in recent months. Like-for-like sales were down 0.7 per cent in March this year versus last. Most of the decline was in non-food sales with a like-for-like of -4.3 per cent.

People are still hitting the shops but they are spending money on food and drink rather than furniture and other homewares – indeed food like-for-like sales were up 4.7 per cent on this time last year. And as Construction News reported last week, supermarkets may become even more confident with their construction plans as global commodity prices continue to ease.

“Food is more resilient than non-food. Supermarkets are responding to the recession. They are trying to offer ever better value than normal and keeping up with their expansion plans,” says a spokesman from the British Retail Consortium.

Food retailers make up eight of the top ten retail clients and so far this year they have spent nearly £500 million on construction – Tesco leads the charge with 11 new stores. Glenigan forecasts there will be £406 million worth of construction starts for quarter three this year, up 21 per cent on a year ago.

And the discounters will come out in force, according to Verdict. Its report, the Future of European Discounters, says: “For discounters, the recession represents a once in a lifetime opportunity in the UK and US. We believe that now is the time for the likes of Aldi, Lidl and Netto to pounce.”


The number two food retailer has more than 800 stores and last month [March] it announced a pre-tax profit of £488 million, which is 22 per cent up on the previous year. Like-for-like sales were up 7.4 per cent. After losing some market share it launched an internal recovery plan in 2007 focusing on non-food, more convenience stores and new and extended larger shops. Most of the refurbishment plan is now complete and the focus is on growing space by 10 per cent by next March.

It spent £364 million on new stores, extensions and refurbishments in 2007-2008 and £452 million in 2008-2009.

It has 300 freehold and long leasehold sites – mostly extensions – which will be developed at a rate of about 20 a year for the next 10 years. It has also formed joint ventures with Land Securities and British Land which will provide 30 new stores or extensions totalling over 500,000 sq ft of sales space.


The UK’s largest supermarket announced pre-tax profits of £3.1 billion last week [21 April] for the year to end of February which is an increase of 8.8 per cent. More than half of all UK shoppers use Tesco on a regular basis.

Group sales were nearly £60 billion and the UK made up £41.5 billion of this. Tesco opened 2 million sq ft of new selling space over the year which included 11 hypermarkets and there are a further 15 planned for the year. This format – Extra – makes up 40 per cent of its sales area. This year Tesco plans to open 8 million sq feet of stores – 75 per cent of which is outside the UK.


The UK arm of US giant retailer Wal-Mart announced it will open nine food stores and five living stores this year. Stewart Samuel, a senior business analyst at IGD, says: “The retailer is yet to disclose the locations for all openings, but has announced that stores will be built in Bury St Edmunds and Chelmsley Wood (West Midlands); while Living stores will be built at Bradford and Wednesbury (West Midlands). Further to the new store developments, the retailer intends to extend 15 sites, with total sales area expected to grow by c. 3.5% (580,000 sq ft) over the course of the year.”

The UK arm of giant retailer Wal-Mart awarded contracts worth £241 million last year including a £50 million warehouse in Newcastle-Under-Lyme which is on site at the moment.

The company awarded contracts worth a total of £241m last year – the largest single project was a £50m warehouse and distribution development in Newcastle-Under-Lyme which started on site last October. Glenigan reports that it has already awarded £27m of contracts this year. It works with Bam Construct, Bowmer and Kirkland, ISG Pearce, McLaren Construction and RG Group.


The firm plans to spend about £400 million a year to increase its floor space by 0.5 million sq ft by 2011, 350,000 sq ft of which will be in 2009. Added to this, it is buying about 0.5 million sq ft, at a cost of £220 million, from the Cooperative Group. It is targeting all UK regions but especially the South. It is focusing on the 8 million households which are not within a 15 minute drive of a Morrisons.

Last month it announced its turnover was up 12 per cent on the previous year, to £14.5 billion, with a pre-tax profit of £655 million, up 7 per cent on 2007/08

Co-operative and Somerfield

The Co-operative Group bought Somerfield last month [March] for £1.6 billion, bringing its total food stores to 3,000 in the UK. Annual sales are expected to top £7 billion as a result.

As part of a £1.5 billion makeover it has refitted and re-branded 2,700 outlets already.

Grocery expert IGD listed the firm as number 10 in its ‘Ten to Watch’ worldwide retailers. Its report says: “It is the largest convenience and neighbourhood retailing group in the UK… It makes for an interesting case study of a retailer committed to responsible retailing yet seeking to re-establish its position in the market.”

Marks and Spencer

M&S has 4.3 per cent of the total market share for food retailing in the UK. Its food sales grew by over £4 billion – or 6.9 per cent last year. It has about 300 Simply Food stores and plans to increase this by 70 this year.

It has modernised 70 per cent of its total stores and plans to update the remainder ‘in the next few years’, 10 per cent of which will be done this year, spending about £250 million of capital expenditure. It also plans to spend about £160 million on new stores this year.

It announced its food sales were up 0.4per cent in its latest trading statement, published last month. Its operating profit for 2007/08 was £1.1 billion, up 4.3 per cent on the previous year.

Discount food stores

IGD estimates that discount food retailers account for 6.3 per cent of the market and this is set to increase to 8.5 per cent by 2013. Aldi was IGD’s number one retailer in its annual ‘Ten to Watch’ list and IGD estimates that it and competitor Lidl will open about 40 to 50 stores each this year. Aldi says that it is constantly seeking new property opportunities and suppliers.

Netto is owned by Dansk Supermarked Group, part of the £3 billion turnover giant AP Moller Maersk Gruppen which has interests in logistics and distribution as well as retail.

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