The bulk of Tesco's UK capital programme is let under partnership arrangements, with 10-15% let using other forms of contract.
Most major developments, such as new stores and major extensions and refits, are carried out by nine contractors. These comprise national as well as large regional players and include Bowmer & Kirkland and Taylor Woodrow. Small projects, such as minor refits or extensions, are carried out by other contractors, which will generally be local or regional firms.
A small amount of work is let under competitive tendering and some stores are built by the developers.
Current and future projects
Tesco continued to dominate UK food retailing in 2002. Its results to March 2002 showed sales rising above £20bn and profit to more than £1.2bn. In early 2002, the group was operating nearly 750 stores comprising 188,000 m2. Its total capital investment programme amounted to £2.03bn in 2001/02, of which some £1.3bn was invested in the UK. This was a modest rise on the previous years £1.2bn. In 2001/02, investment in the UK included £219m for the purchase of lease buy-backs and freeholds. Close to £500m went on new stores, and £270m on refits and extensions. The investment encompassed 55 new stores, including 17 superstores, one Metro and 30 Express Stores. Including refits, total new space opened for the year totalled close to 130,000 m2. For 2002/03, the group expects to open 150,000 m2, which suggests a rise in investment above the recent £1.3bn.
In its interim results statement (six months to September 2002) Tesco announced a UK sales increase of 6.8%, of which 3.9% came from existing stores, and 2.9% from new stores. UK capital expenditure totalled £530m, of which £304m went on new stores, and £108m on extensions and refits. The investment provided 37 new stores and 57 extensions and refits.
Regeneration is also a growing part of the group's expansion programme. A store in Beckton, east London, opened last year, and Tesco is involved in 13 other regeneration partnerships.
By international standards, UK food retailers invest heavily. Investment has been driven recently by rising food prices and strong consumer expenditure. However, both these forces are weakening, implying that the pressure to invest in new space will ease. Tesco's recent acquisition of T&S Stores is an indication of this, as the purchase expands Tesco's presence in the £20bn UK convenience market. T&S owns more than 1000 stores. Tesco says it will rebrand 450 of these as Express stores, taking that format to almost 600 by 2003. A target of 1000 Express stores looks possible by 2005.
Construction director Kevin Pleass Contact details
Cirrus Building, Shire Park, Welwyn Garden City,
Hertfordshire AL7 1AB
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