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Current and future projects
Somerfield entered the third year of its five-year recovery programme in early 2002. Although sales growth by the group was regarded as disappointing, capital expenditure increased to almost £120m, with the group expecting to raise this sharply in 2002/03. The majority of the £117m invested in 2001/02 went on improving existing stores. In Kwik Save stores, Somerfield has been investing in minor refits to revive old brands. Overall, the group refurbished 28 stores, and gave 98 minor refits. New stores consist primarily of the new City Fresh formats. About 10 of these were opened in 2001/02. Some of these are new stores, whereas others are conversions from the Somerfield brand. The aim of the City Fresh format is to tap into the growing demand for fresh food. Less positively, the group's forecourt opening programme with Elf suffered from Elf's involvement in the TotalFinalElf merger.

Looking to the future, Somerfield says it has £170m of funding available for investment, with plans to invest at least £100m over 2002/03. About 100 stores have been earmarked for refurbishment. Elsewhere, the group is rationalising its distribution system, reducing the number of depots from 23 to 14. Last year it opened a new warehouse near York. It has planning for one in St Helens, and is seeking a site in the South-east.

Essential information
Following problems with integrating Kwik Save operations, and disappointing sales growth, Somerfield's chief executive left in October 2002. At the time the group also released a trading statement reporting that profit would be below expectations and that the group had had to hold down prices in order to attract customers. Since 1998, Somerfield's market share has fallen from 5.9% of total food sales to 4.3% in 2001.

In November, the group announced that its Kwik Save boss had left. However, its interim results for the six months to the end of October showed that group sales had been better than expected over the second quarter of the financial year, increasing 2.2% over the 12 weeks to November. This compares with a first-quarter fall of 0.3%. Encouragingly, the recent sales increase was achieved without lower prices.