UNITED KINGDOM'S SAFEWAY TO GO FROM SUPER TO HYPER

JAMES FALLON

HAYES, England [FNS] -- Safeway plc here is going after Wal-Mart.

The U.K.'s fourth-largest food retailer has revealed a $294 million plan to remodel and enlarge its 70 biggest stores to turn them into hypermarkets selling everything from food to home furnishings.

A Safeway spokeswoman said no timeframe has been set for the remodelings but they are expected to begin late next year after planning permission is received.

"The idea is to increase the space available for promotional activity on food, improve our offering in such services as dry cleaning and photo processing and increase our nonfood selection in kitchen, dining and bathroom products," the spokeswoman said.

The stores will not sell apparel or electrical appliances, however, unlike the hypermarket formats of such Safeway competitors as Tesco plc, Cheshunt, England, and J. Sainsbury plc, London.

Safeway's move is a response to Wal-Mart's entry into the British market through the $10.8 billion acquisition last year of Asda, the U.K.'s third-largest food retailer. Asda's stores average about 60,000-square-feet and are generally larger than those of its competitors. Asda already has announced plans to convert some backroom space to selling space, which would in some cases add up to 20,000 square feet.

Wal-Mart also is slowly expanding Asda's nonfood offering with the eventual goal of a 60-40 split between food and nonfood. It currently is about 80-20. The company recently opened an Asda/Wal-Mart Supercenter in Bristol, England, its first co-branded store in the U.K.

Safeway's plans to open its own hypermarkets are the third plank in the turnaround program being overseen by its chief executive Carlos Criado-Perez, who is a former Wal-Mart executive.

Criado-Perez, who joined the company last year, already has begun remodeling Safeway's 484 stores to devote more space to fresh foods. About 240 stores have been completed. He also has sharpened its pricing following the dropping of Safeway's loyalty-card program. The company has taken the money saved from the loyalty card to invest in localized price promotions.