Johannesburg — FASHION and furniture retailer Mr Price said yesterday it would incur more than R1,5bn in capital expenditure over the next five years, a 50% increase on its previous projection.

Mr Price, whose floor space grew 19% during the previous financial year, said it aimed to double its footprint in the next seven years. The company said its plans to spend more than R1,5bn were "in response to customer demand" and it sought to improve and expand product offerings.

Syd Vianello, an analyst with Nedcor Securities, said it was significant that the group had increased its capital expenditure target 50% within a year. In the group's annual report last year, it had indicated capital expenditure of R1bn within five years.

Mr Price CEO Alastair McArthur said yesterday the group would spend about R300m a year in the next five years, an increase on the previous average of R200m a year. Mr Price would fund the expenditure from cash reserves and would not take on debt, he said.

McArthur said Mr Price clothing would see few new stores, but existing stores would be revamped and - if possible - expanded to a larger size format . Mr Price would be trying out standalone clothing stores and, towards the end of next year , might consider its own standalone malls that would host a range of its brands and might have restaurants as anchor tenants, he said.

Vianello said the group was aggressively taking on the large department store chains such as Woolworths and Edgars. Between 1993 and 2002, Mr Price's average store size was between 330m' and 340m'. However, in the previous financial year, the company launched a 3000m' apparel store in Durban's Pavilion shopping centre and was migrating to larger format stores, he said.

McArthur said new Mr Price Home stores would be much larger than in the past and generally between 1500m' and 6000m'. He said if it was not possible to expand existing sites, the company would look at more standalone stores.

Furniture would also be an important component of the group's growth plans. This implied larger store formats to give the "big furniture groups a run for their money", Vianello said. Mr Price "will generate significantly higher free cash" once its capital expenditure programme started tapering off. "It seems high, but the reality is when you roll out big stores, you must invest in stock and fittings."

McArthur said the company would continue to roll out sport stores. It now had eight outlets. It would look at opening about 40 Sheet Street stores a year and about 10 Miladys a year. Refurbishment of existing Miladys stores was about 80% complete, and the programme would require very little capital.

The group said previously it was targeting sales of R15bn with an operating margin of 12% by 2012, requiring annual compound growth of 20%. Revenue to March this year hit a record R6,2bn, a 24% rise on the previous year's R5bn.

McArthur said the Redgold IT project, which was aimed at enhancing merchandise planning and distribution, would account for a significant amount of capital expense as it was rolled out across the group.