Australian retailer Coles plans to increase the size of its supermarkets to provide more space for groceries and fresh food.

Managing director Ian McLeod, speaking at an investors strategy briefing this week, said Coles aims to increase the floor space of its stores by 2% each year.

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McLeod, who this week agreed to extend his contract with Coles, said Australia’s second-largest retailer has been replacing stores with an average size of 1,700 sq m with 2,700 sq m outlets, adding the optimum store size was 3,000 sq m.

The managing director said Coles expects to open 19 more bigger stores, close 11 stores, and extend ten stores in 2012. Up to 400 are also set to be refurbished.

“We’re thinking about the second wave of transformation,” he told analysts. “Our view is that we want to open bigger stores wherever we can, and the stores we’re opening have now got 2,800 sq m, which is about 40% larger than the ones we’re closing.

“Overall we’re seeing growth in terms of gross space, so it’s not just about store numbers, it’s about optimisation of space on the ground. And we’re seeing that come through in terms of our pipeline this year and our pipeline next year. We are building a strong platform for solid growth for years to come.”

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McLeod said the change in store size be an “ongoing dynamic”, adding: “I don’t see it changing and it will be part of our business going forward.”

Last month, parent firm Wesfarmers said reported a 5% increase in third-quarter sales at Coles to A$7.8bn (US$8bn), with gains driven by a 7.9% jump in sales at convenience stores. Like-for-like sales were up 2.7%.