FAL strengthens hold

THE make-up of Western Australia’s retail market swung towards the independent retail chains last week when Coles Myer agreed to sell five of its Newmart stores to Foodland Associated Limited.

Foodland will rebadge the stores under the Action brand, taking FAL’s stable in WA to 38 stores.

The deal involves around 12,500 square metres of retail space and includes metropolitan shopping centres in Ocean Keys, Noranda, Stirling Central and Garden City, plus a regional store in Collie.

The shopping centres will come under FAL’s Action banner by the end of the month.

FAL general manager of corporate affairs Gerry Masters said Action was under-represented in comparison to Woolworths and Coles, and that FAL had jumped at the rare opportunity to buy five supermarkets in WA.

Supermarkets are tightly held in WA and Mr Bennet said the last time even two grocery stores came on the market was several years ago.

It’s believed the national chain’s plans to rebadge its Newmart stores under the Coles banner was a reason for the sale. The Newmart properties sold to FAL were considered too close to existing Coles supermarkets for the rebadging to be financially viable.

The sale will add impetus to the strong growth the Action supermarket chain has experienced of late. In its recently released first quarter sales the retailer forecast a 10.5 per cent increase in sales for the fiscal first quarter of 2004.  The total group sales for Foodland for the quarter were $A1.552 billion, a rise of 3.5 per cent over the previous corresponding period.

Over the past two years FAL has expanded from its base in WA into other parts of Australia and New Zealand. FAL now has 42 stores in Queensland and northern NSW and operates 71 department stores across NZ. FAL also recently bought Woolworths NZ.

Next month the retail company expects the finalisation of its plans to create an unlisted property trust to buy FAL’s Australian industrial properties and two shopping centres, allowing FAL to utilise an expected $150 million to create additional shareholder value.

The trust, to be called FAL Property Trust, will comprise FAL’s distribution centres and support office complexes in Canning Vale and Richland, Queensland, plus the FoodLink food service warehouse, the Dog Swamp and Busselton shopping centres, and the Balcatta Cash & Carry warehouse.

FAL plans to lease back the properties for extended periods.

FAL managing director Trevor Coates said that, given yields on property were lower than the company’s weighted average cost of capital, it was a logical move.

“Initially the funds released will be used to retire debt but will be available to fund organic growth opportunities or suitable acquisitions, should these be identified,” he told WA Business News.