Fears have been raised that the rate of expansion by the big grocers will hit their financial returns and like-for-likes.
Food retailers are engaged in “the biggest capital/expansion war in the sector’s history” and “at the centre of a perfect storm”, warned Evolution analyst Dave McCarthy.
By 2014 grocers will have opened another 18m sq ft of new space – an increase of more than 20% and more space than Sainsbury’s had at the end of its last financial year. At the same time, consumers are under pressure.
McCarthy said: “With more capital and slower growth, industry returns are falling. About 18m sq ft of net new space requires about £15bn capex.
“The big four need to add over £20bn to existing sales of about £95bn to earn an adequate return. This looks unlikely. With fewer weaker players, less soft market share and a more concentrated industry, cannibalisation and impacts will increase.”