Tesco to invest RM800m in 11 new stores

BRITISH retailer Tesco Stores (M) Sdn Bhd will invest RM800 million within the next 12 months as it opens 11 stores, bringing the total number of Tesco stores to 31 and possibly over RM3 billion in sales.

The planned expansion, growth in like-for-like sales coupled with a strong consumer friendly pricing policy, is expected to help sales for the year ending February 28 2009 grow by not less than 30 per cent.

"We are currently constructing eight stores and we have plans to develop a further three stores, hopefully within the next 12 months. We are also building a second distribution centre for our ambient products," chief executive officer Chris Bush said.

Bush said Tesco's growth in Malaysia, in terms of expansion and sales, is one of the biggest markets outside of the UK.

"We ended 2006/2007 (February 2007) with RM1.7 billion in sales. In the current year (ending February 29 2008) we expect it to be significant, at around 50 per cent ... and we will be disappointed if we do not grow by at least 30 per cent in the coming year (ending February 2009)," he said.

Tesco, which opened its first Malaysian hypermarket in 2002, will also post its maiden profit in the current year ending February 2008.

Apart from the RM800 million investment, another RM100 million will be for the opening of a distribution centre. The investments will come from its 15-year-tenure RM3.5 billion bond sale.

"RM100 million will be for the distribution centre to be located in Bukit Beruntung," Bush said.

Two of the scheduled 11 stores - in Johor Baru and Prai - are Makro outlets which are being renovated and converted into Tesco Extra outlets.

New outlets are also scheduled for Mergong, Kedah, Kampar and South Ipoh in Perak, Desa Tebrau and Setia Alam in Johor and Semenyih in Selangor.

Bush, who was speaking to reporters yesterday to announce Tesco's price commitment for the next 12 months, said it has slashed RM20 million off the price of 500 products. The price cuts range from 5-41 per cent.

Tesco, which initiated two other price cuts in 2006 and 2007, investing RM6 million and RM15 million respectively, is this time taking its pledge a little further.

It announced that 50 basic everyday staples, which are its best-selling lines across fresh and grocery including oil, sugar, flour and rice will not be beaten on price.

Tesco will refund twice the difference if any of the 50 products is found to be cheaper elsewhere.

Tesco in Malaysia, a 70-30 joint venture between Tesco Plc and Sime Darby Bhd, employs 7,000 people at its 20 outlets and is set to employ another 5,200 people in the next year as its expands.

Going forward, Bush expects Tesco to invest a further RM500 million to RM600 million for openings in the 2009/2010 financial year.

By New Straits Times (by Vasantha Ganesan)