Sainsbury's: Why grocer struck a deal to acquire 10 Homebase stores to convert into supermarkets

Sainsbury’s said the move is a key part of its Next Level Sainsbury’s plan to offer more food choice to more customers.

It added that the acquired stores are in target locations that will grow Sainsbury’s supermarket coverage across England, Northern Ireland and Scotland.

Once they are converted, the shop floor area of the stores will range from approximately 15,000 to 40,000 sq ft and will add a total of around 235,000 sq ft to its supermarket trading space.

The addition of new locations means nearly 400,000 more people will be within a 10-minute drive of a Sainsbury’s supermarket.

The supermarket said it expect the stores to achieve strong returns, with return on capital employed in the low teens, in excess of Sainsbury’s cost of capital.

The first of these stores will open next summer and Sainsbury’s aims to complete the conversion of all sites by the end of 2025, with capital expenditure relating to acquisition and fit-out costs incurred across financial years 2024/25 and 2025/26.

Sainsbury’s said its free cash flow targets remained unchanged and it continues to target delivery of at least £500m retail free cash flow in financial year 2024/25 and at least £1.6bn retail free cash flow over the three years to financial year 2026/27.

The conversion of these sites into supermarkets is expected to create approximately 1,000 new Sainsbury’s roles.

Sainsbury’s said it would guarantee an interview for any Homebase colleagues who are placed at risk of redundancy as a result of this transaction.

Simon Roberts, chief executive of Sainsbury’s, said: "Sainsbury’s food business continues to go from strength to strength as we push ahead with our Next Level Sainsbury’s plan.

"We have the best combination of value and quality in the market and that’s winning us customers from all our key competitors and driving consistent growth in volume market share.

"We want to build on this momentum which is why we are growing our supermarket footprint.

"Our ambition is to be customers’ first choice for food and these new stores will showcase some of the best that Sainsbury’s supermarkets have to offer to even more communities around the country.”

The 10 Homebase stores acquired by Sainsbury’s are in Birmingham Sutton Coldfield, Bromsgrove, Cromer, Derry/Londonderry, Fareham, Inverurie, Lowestoft, Newark, Omagh and Rugby.

Last month, Sainsbury’s revealed it had notched up a rise in first-quarter sales as solid grocery trading offset the impact of bad weather on its general merchandise and clothing businesses.

The chain reported a three per cent rise in like-for-like sales, excluding fuel, in the 16 weeks to June 22, stripping out the closure of its Argos business in Ireland.

Total grocery sales lifted 4.8 per cent as the firm saw robust growth by volume, although this was the slowest growth seen for many quarters as food inflation has fallen back significantly.

Sainsbury’s revealed that total general merchandise sales fell 4.3 per cent, due largely to the wet early summer weather.