Forecast 2000: Another good construction year

Store Equipment & Design, July, 2000

Good times and rapid consolidation within the supermarket industry appears to be supercharging investment in new and remodeled stores and equipment upgrades.

Capital spending plans for large and small retailers alike are up sharply during Year 2000, compared to 1999. (Because publicly-traded companies use different reporting periods, the "2000 fiscal year" used here runs through mid-calendar year 2001).

Large expanding chains like Albertson's and Safeway invested 5 percent of sales into capital projects in 1999, and both have announced increases for the present year in spending and in new store construction and remodeling projects.

Dwarfing all capital budgets is Wal-Mart's spending plans for year 2000 which will total $8 billion. Last year the discounter opened 157 new supercenters, and by January 2001 expects to have 165 more new supercenters In addition, Wal-Mart plans to add 10 Neighborhood Markets, its new conventional supermarket prototype; 40 new discount stores; and 140 new Sam's Clubs.

Even smaller chains are boosting capital spending in order to protect markets against further erosion from larger competitors. For example, Homeland Holding, an 80store supermarket chain in Oklahoma that recently emerged from financial difficulties, purchased 14 stores last year and expects to spend $10 million on remodels this year, up sharply from last year. The reason: Wal-Mart will open five new supercenters and six Neighborhood Markets and Albertson's will add four new stores into their market.

Also, wholesalers liked SuperValu, Nash Finch and Penn Traffic have boosted capital spending budgets for 2000 in order to expand their corporate store network, but also to help finance growth for their stronger independent affiliates.

YEAR 1998

New stores 960

Remodeled 1020

Capital spending $13.449B

YEAR 1999

New stores 1330

Remodeled 1910

Capital spending $17.167B

YEAR 2000 PROJ.

New stores 1850

Remodeled 1830

Capital spending $18.368B

Source: Corporate annual reports. SE&D Store Expansion Database

(Projections are based on capital spending plans announced for publicly traded companies. These projections are then applied to the entire supermarket industry based on a formula that estimates smaller chain spending at 50 percent of the reporting base.)