Delhaize has insisted that its planned increase in capital expenditure during 2010 will fuel mid-term growth across its retail banners in the US and Europe.
The company, which today (11 March) booked a 4.2% increase in operating profit during 2009, said that it would increase capex to EUR800m (US$1.09bn) over the coming 12 months.
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Speaking during a conference call, president and CEO Pierre-Olivier Beckers said that about 60% of this figure would be invested in improving and expanding the company’s store base, with the remaining 40% to be invested in infrastructure improvements, including systems, supply chain and logistics.
During 2009, Delhaize trialled a low-cost supermarket model, Bottom Dollar, in the US and launched its discount chain, Red Market, in Europe.
Management revealed that the company plans to “double” the size of the Bottom Dollar chain in 2010 and increase the number of Red Markets from three to 13 during the coming 12 months.
Looking to 2012, Delhaize said that it wants to have opened 250 new stores in its discount formats, as well as in the company’s “new” markets of Romania and Greece.
The expansion, management said, would be in addition to a store renewal programme that will see it remodel 130 stores in existing formats and open between 120 and 130 new stores at its established banners.
These store openings will increase selling space by approximately 2.5%, management revealed.
The company also emphasised that it is on the look-out for acquisitions that would expand its presence in strategic markets.
In order to drive sales volumes, Delhaize said that it will also continue to invest in lowering prices with the aim of becoming the price leader in its local markets.
This investment will be funded by margin expansion and cost savings, the company suggested.
“Our new game plan targets savings of EUR300m annually by 2012,” Beckers said.
These savings will be used to offset cost inflation, protect the bottom line and fund investments in store openings and pricing initiates, he added.
However, Beckers conceded that returns on increased capex would require a longer-term view than 2010 profitability to gather momentum.
Delhaize said that any gains from investments in pricing – made at the start of the year – and new store openings in 2010 would be weighted to the second half of the year.
“We will see higher returns on these investment in 2011,” Beckers added.
