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Kesko to invest 20 mln euros in store revamp

With the remodelling, the retailer expects to keep sales growth at more than 10 percent, especially in its local food stores.

‘We are looking for double-digit growth numbers-we have so far done 70 stores and the experience has been positive in sales growth figures and in feedback from our customers,’ Svensk said, adding around half of the investment would be booked in 2008 and the rest in 2009.

The revamp, which will focus on new customer services, freshly baked bread and a varied selection of fruit and vegetables and ready-to-eat meals, is scheduled to be completed by the end of 2009.

‘It’s a bit of a mixed bag,’ said Kaupthing Bank analyst Martin Sundman.

‘They’ve had this strategy for a couple of years, when they’ve been focusing on high quality and a wide range of products and it has been a good strategy so far, but if the market goes bad and people start consuming less, I don’t know if that’s the best way to go.’

Finnish economy, which grew well above 4 percent in the past two years, is expected to slow down to around 3 percent in 2008 while private consumption is forecast to grow around 3 percent.

Sundman said the strategy might not pay off if economic growth slows down as forecast.

‘That’s a real high-cost strategy,’ he said. ‘It works well in an environment when economics are growing and people have money to spend on food, but if we are going to lower economic activity, it’s certainly risky.’

Kesko said earlier this month the group’s 2008 operating profit would fall year-on-year, while operating profit at its key food unit would be level with 2007.

In 2007, the retailer reported an operating profit of 332 million euros.

Shares in Kesko were up 2.8 percent at 30.57 euros by 1026 GMT, compared with a 0.8 percent stronger DJ Stoxx European retailers index.