Spinneys eyes 10 stores in new deal

The retailer has signed an agreement with SouqExtra!, a new chain of shopping and community centres.

DUBAI // Spinneys may open up to 10 more stores across the UAE in two years through an agreement with SouqExtra!, a new chain of shopping and community centres. The first of SouqExtra!'s 10 mini-malls will open in Dubai's Ewan Residences in October and feature a 400-square-metre Spinneys outlet. Jannie Holtzhausen, the chief executive of Spinneys Dubai, said his company had signed an agreement to open stores in SouqExtra!'s centres where financially viable. He said the expansion was in line with Spinneys' steady growth in the past eight years.

"We're opening small convenience stores where the catchment area justifies them," he said. "We've been very successful with that and will continue to do that." Mr Holtzhausen said he was evaluating each of SouqExtra's other locations such as Al Quoz in Dubai, Al Mirba in Fujairah and Al Batheen in Al Ain to decide whether a Spinneys would fit. Saleh Lootah, the managing director of SouqExtra!, said it surveyed residents near its planned locations and Spinneys topped the list of preferred stores.

While the prices can be higher than at large-scale hypermarkets, Spinneys was selected for its quality, he said. "It is a little bit more expensive, but it is the reputation that we're looking for," said Mr Lootah. The SouqExtra! concept will be located near smaller communities and a slightly higher price will be justified by its convenient location, he said. SouqExtra! will spend about Dh300 million (US$81.6m) to build the first 10 mini-malls, which will house a grocery store and services such as dry-cleaning, a coffee shop and community-gathering spaces, by next year.

Charles Starbuck, the general manager for SouqExtra!, said the group was looking for sites in Sharjah and Abu Dhabi. From here, the chain hopes to expand to Oman, Qatar and other Gulf countries, Mr Lootah said. "We are very active in getting real estate," he said. "If land is in the right spot in the right place, we will be looking to take it." Mass supermarket sales in the Emirates are forecast to grow 80.1 per cent by 2013, according to the research firm Business Monitor International, based in the UK, driven mainly by customers trading up to higher-value foods. Grocery sales have remained steady during the economic downturn as consumers cut down on restaurant dining and cook at home.

Mr Holtzhausen said Spinneys had seen positive growth so far this year, but sales had grown at half the rate of last year. "Growth has slowed down substantially, but we are lucky we are predominantly a food chain and not as severely affected as those with a large non-food component," he said. Laurent-Patrick Gally, a retail analyst with Shuaa Capital, said these kinds of local shopping centres had the potential to do well.

"As long as the price differential with the big hypermarkets is not too big, it will do fine, even in a slowing environment," he said. [e-mail]