Wm Morrison Supermarkets, the country's fourth-biggest grocer, is buying online baby products retailer Kiddicare for £70m to kick-start an online business selling non-food goods.
Morrison said the deal would give it a technology platform and distribution centre to develop an online non-food business, launching its first products in 2012.
The move is part of chief executive Dalton Philip's drive to explore new avenues of growth for Morrison, including convenience stores and selling groceries over the internet as well as more general merchandise ranges.
While Morrison has outpaced the sales growth of larger rivals like Tesco and Asda for most of the past two years, analysts have said it was being slower in moving into higher growth markets.
"The opportunity to leverage the Kiddicare range across Morrison's 12 million weekly shoppers is clear," said RBS analyst Justin Scarborough, adding that Morrison's share price discount to rivals -- it trades at 11.2 times earnings forecasts for calendar 2011 against a sector on 13 – was unwarranted.
Kiddicare, founded in 1974 by Neville and Marilyn Wright, had turnover of £37.5m in its last financial year, growing 75 per cent over the past three years.
It will continue to trade separately as kiddicare.com, led by Scott and Elaine Weavers-Wright, children of the founders.