Hypermarkets here by the end of 2006

The Warehouse has the ability to turn some of its existing sites into hypermarkets, the discount retailer said yesterday.

It plans to open two hypermarkets - stores that contain both general merchandise and a full grocery offering - before the end of 2006.

"In our current position, we already have the store size and planning consent in a number of locations that could accommodate a hypermarket format," Warehouse manager of group corporate affairs Phil Jamieson said.

The company would not disclose how many Red Sheds could be transformed into hypermarkets or how many hypermarkets The Warehouse planned to open.

"We believe that eventually there is the scope for more than 20 hypermarkets in New Zealand," said Jamieson. They would not necessarily all belong to The Warehouse.

The comments indicate the company has not significantly altered either its plans to enter the grocery market, or the timing of that entry, despite revelations Australian supermarket heavyweight Woolworths will become a major competitor.

Warehouse chief executive Ian Morrice first talked about the hypermarket strategy at an industry conference in early May - before Woolworths struck a deal to buy New Zealand supermarket owner Progressive Enterprises in late May.

Speculation has centred on one of the two Warehouse hypermarkets opening close to the company's head office, on the North Shore, and the other in South Auckland.

Food Industry Week reported Morrice's comments to delegates at the Food and Grocery Council half-yearly meeting that groceries were a key driver of "a halo effect" - generating stronger general merchandise and clothing sales by increasing the frequency of shoppers' visits.

He also said the company had a strategic advantage entering the grocery market because of the size and geographical spread of its store network.

Progressive, owner of the Foodtown, Woolworths and Countdown chains in New Zealand, was also planning hypermarkets before it was purchased by Australia's Woolworths.

It had plans for a 9100 square metre hyperstore on a site near the centre of Manakau City, one of up to 10 large-format stores carrying as much as 40 per cent general merchandise envisaged by the company.

When Woolworths announced its deal to buy Progressive from Australia's Foodland, chief executive Roger Corbett said an assessment of New Zealand supercentres would be high on the agenda.

He suggested a model with a separate supermarket and Woolworths' general merchandise brand (Big W) under the roof of one complex. But outgoing Foodlands boss Trevor Coates said last week that, in New Zealand, integration of general merchandise with grocery within a single store was vital.

Foodstuffs, which owns New World and Pak n' Save, has also said general merchandise is a "focus category" for the company..