Supermarket group Musgrave has announced an aggressive expansion campaign for its Supervalu grocery chain in Dublin, which currently accounts for less than 10 per cent of the division's €1.6 billion yearly turnover.

Musgrave plans four flagship outlets in the city centre, hoping to raise turnover in the capital substantially from its current level of €150 million. It also plans eight new regional stores.

The stores, at Aston Quay, O'Connell Street, Talbot Street and North King Street, will be run by existing owners of Musgrave-Centra and Supervalu branches, including Mr Séamus Griffin, who has opened a number of city centre Centra outlets.

The group's ambitions in Dublin received a setback recently when Roches Stores said it was closing its Supervalu-branded branch at Henry Street, in a move away from the grocery sector.

Musgrave unveiled its strategy for Dublin, where it believes it can challenge Superquinn in particular, as it announced an 8 per cent rise in turnover at Supervalu to €1.67 billion in 2003.

New managing director Mr Donal Horgan said profit margins at Supervalu stores averaged 5-7 per cent last year. However, he declined to provide an overall figure.

With food inflation slipping to zero per cent, it is unlikely that Supervalu will repeat last year's 8 per cent revenue increase in 2004.

However, Musgrave is confident that the division will achieve "strong" single-digit growth, said Mr Horgan.

Supervalu says the Dublin and regional opening will create 650 jobs. Musgrave is spending €150 million on new outlets, and €40 million on renovating existing shops.

Roches's decision to close Supervalu-branded stores at Henry Street and Blanchardstown in Dublin, and Limerick had not strained relations with Musgrave, Mr Horgan said.

"The growth increase... has surpassed our predictions and is particularly satisfying given the intensifying competition in the retail sector.

"New stores openings... will add significantly to retail turnover in the coming year," he added.