Costco plans to open 40 UK mega-stores

COSTCO, THE discount warehouse operator, is hoping to open 40 mega-stores in the UK in order to defend its position against Wal-Mart, the US retail giant which completed its pounds 6.7bn takeover of Asda last month.

Costco's plan came as Asda announced a fresh round of price cuts yesterday, which will see it invest pounds 30m in lower prices on 100 lines including Coca- Cola and Nescafe coffee.

The new initiative is part of Asda's "Rollback" scheme under which it has undertaken to cut the price of 4,000 product lines by the end of the year.

Costco, a US-listed company in which Littlewoods has a 20 per cent stake, currently has seven stores in Britain with planning applications outstanding for a further six.

Although the company has been frustrated by a planning process it describes as "slow, expensive and uncertain" it hopes the situation may be about to change.

Jim Murphy, managing director of Costco UK, said: "We would like a more balanced view from the Government. We are interested in the regeneration of brown-field sites such as former factories. We create around 150 new jobs per store and we are offering low prices. We bring an extra element of competition."

Costco has a membership warehouse format similar to Wal-Mart's Sam's Clubs in the United States. Trade buyers are charged pounds 15-a-year membership with a fee of pounds 20 for private members.

The huge 100,000 square feet stores stock discounted brands such as Cartier watches as well as food items sold in bulk such as bottles of Coca-Cola, baked-beans and fresh foods.

Costco reported buoyant figures in the US last week. Sales in the four weeks to 1 August were up 14 per cent on last year to $2.1bn. Like-for- like sales were up by 11 per cent.

Mr Murphy said UK like-for-like sales were "even better" and that the UK operation is making healthy profits.

The first warehouse clubs opened in the UK about five years ago and were tipped to change the face of British retailing. But their development was constrained by the planning regulations and some operational problems.

Now, with an increasing emphasis on value for money among UK consumers, Costco believes the warehouse club's time has come.

"It's not going to change the face of UK retailing but it is a viable concept that has a place in the distribution network," said Mr Murphy.

Costco has 290 stores, mostly in the US and Canada. It recorded profits of $460m (pounds 289m) last year on sales of $24.3bn (pounds 15bn).