Tesco may have called an end to the space race but if rivals’ expansion plans remain unchanged, the equivalent of the entire Sainsbury’s estate could come on stream over the next five years.
Extrapolating on guidance for the coming year, Investec analyst Dave McCarthy has estimated that 19 million sq ft of physical space and 6 million sq ft of equivalent space in internet growth could become operational by 2018.
“Philip Clarke may have called an end to the space race, but I don’t think they’ve heard him at Sainsbury’s, or indeed Morrisons, the discounters or Waitrose,” he said.
Sainsbury’s is expected to deliver one million sq ft of new physical space a year, Morrisons is adding 0.5 million sq ft this year and Aldi has said it wants to double store numbers to 500, while Waitrose is gunning to double market share to 10%.
McCarthy warned that the grocery market would not grow anything like enough to support so much extra space.
“If current plans continue, then industry capacity over the next five years will increase by circa 20%, which in a no-growth industry will continue to erode returns. The damage will be all the greater given high operational gearing,” he warned.
The focus of the supermarkets’ space growth plans is on c-stores and the internet, which McCarthy added were less profitable and cannibalised large store sales.
“When it comes to the internet and convenience, the quoted sector is damned if it does and damned if it doesn’t,” he said.
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