Sainsbury taps investors for £432m for expansion

Supermarket chain plans to increase selling space by 15% over next two years

Sainsbury's raised £432m from investors yesterday to step up its expansion and take the fight to rivals beyond its heartland in the South of England, as the grocer unveiled its strongest underlying sales for more than a decade in the three months to 13 June.

Sainsbury's tapped investors for £242m through a placing of new shares at 310p and an £190m offering of convertible bonds, due in 2014. Britain's third-biggest supermarket said it would use the proceeds to take advantage of "significant opportunities" in a sluggish commercial property market and to add 15 per cent more selling space over the next two years, up from a previous target of 10 per cent. The expansion will take place primarily in Scotland, Wales and the North and West of England, where it is currently under-represented. Justin King, the chief executive, said: "We have seen greater opportunities than we ever thought possible [in the property market]."

The move signals Sainsbury's growing confidence in its strategy and a more aggressive property drive, following a lack of development over the past 20 years which has left it playing catch-up with rivals, particularly Tesco, which has a grocery market share of nearly 31 per cent. The capital raising will enable Sainsbury's to open 50 new stores and extend 50 others by March 2011, adding about 2.5 million square feet of new space. Non-food ranges will account for about 40 per cent of the new floorspace, as Sainsbury's ramps up its general merchandise offers.

Jonathan Pritchard, an analyst at Oriel Securities, said Sainsbury's was coming from "a position of strength" to tap the equity and debt markets. But Darren Shirley, at Shore Capital, said he was "somewhat puzzled" by the group's decision to use a placing to raise funds, given that its balance sheet was "hardly stretched".

Sainsbury's has also acquired a further nine stores from the Co-operative Group for £29m, having already purchased 24 from its rival for £83m.

Over the 12 weeks to 13 June, Sainsbury's delivered underlying sales growth of 7.8 per cent, excluding fuel and VAT. This was substantially ahead of the 4.3 per cent like-for-like sales growth in the first quarter posted by Tesco on Tuesday, but behind Morrison's 8.2 per cent, albeit for slightly different periods.

Mr King said the "exceptional performance" was ahead of internal long-term targets of 3 to 4 per cent growth. He praised the continued strength of its own-label "basics" ranges, sales of which soared by more than 50 per cent over the period, and its TU clothing range, which had its "best-ever quarter with a record one million transactions in a single week".

Non-food sales grew at twice the rate of food sales. In the second quarter, the Sainsbury's website will begin selling 8,000 non-food products, including kitchenware and furniture. However, clothing will not initially be sold online.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test