Sainsbury's reveals huge expansion plan

Published on Wednesday 17 June 2009 10:13

SAINSBURY'S today announced aggressive plans for a huge expansion of the number of stores it operates.

The supermarket giant said it will increase store space by up to 15 per cent before March 2011.

In a clear sign that it believes it can benefit from the recession, it said it would snap up "attractive opportunities" across the UK.

The moves are part of its 'From Recovery To Growth' strategy and will see it add 2.5 million square feet of selling space to its store portfolio.

It also announced plans to raise 445 million from investors to fund the expansion drive, and revealed it achieved a bigger rise in sales than market leader Tesco and rival Morrisons in the first quarter of the financial year.

Sainsbury's said like-for-like sales excluding fuel and VAT increased by 7.8 per cent in the 12 weeks to June 13, compared to 7.3 per cent at Morrisons and 4.3 per cent at Tesco.

Chief executive Justin King said: "Over the past four years we have reinvigorated our business and demonstrated the strength of Sainsbury's brand with 18 consecutive quarters of like-for-like sales growth.

"The fundraising announced today will provide us with the financial flexibility to take advantage of current opportunities to grow our business further and faster.

"We can speed up our growth in areas of lower market share, maintain the strength of our balance sheet and invest in the long-term growth of the business."

The firm has already been stepping up the expansion of its Local store format. It lost the battle to move into the former Woolworths store in Stockbridge to Scotmid but has since announced the opening of a new outlet in a former Blockbuster store in Corstorphine. It is also eyeing a number of other sites in Edinburgh, where it already has five stores.

The continuing expansion will be funded by raising 255m in a placing of new shares and 190m in an offering of convertible bonds due 2014.

Sainsbury's sales growth indicates it is performing much better than last year. Sales not adjusted for VAT increased seven per cent – significantly higher than its 4.5 per cent full-year rise.

The firm said that it has lowered 7000 prices since January as it continues to battle rivals on price.

"Consumers are spending more cautiously but continue to look to trusted brands to act responsibly on ethical and environmental concerns on their behalf," said Mr King.

"We have had a strong start to the new financial year. While we expect the economic environment to remain challenging during 2009, our wide customer base and focus on great products at fair prices means we are well positioned to continue our progress."

Latest TNS Worldpanel market share data showed Sainsbury's saw the second fastest annual growth behind Morrisons at the expense of Tesco.