SUPERMARKET giant J Sainsbury unveiled plans to raise £445m to fund its expansion yesterday, sending its shares plummeting over five per cent on dilution fears.
Chief executive Justin King said the firm will add 50 new stores over the next two years and extend between 30 and 35 stores, resulting in a 15 per cent retail space expansion, compared to the 10 per cent it had previously forecast.
The new plans will add 2.5m square feet in retail space to its existing 16m square feet.
However, some analysts said the size of the fundraising suggested that the grocer had more ambitious growth plans.
King said the cash call, made up of a £255m rights issue and £190m bond issue, will let the firm grow “further and faster”. It is thought the issue will be priced at around 310p.
The cash call came as King said first quarter like-for-like sales excluding fuel were up seven per cent, rising to 7.8 per cent when factoring in changes to VAT.
“Customer numbers have increased to over 18.5m a week. Customers are spending more cautiously but continue to look to trusted brands,” added King.
Shore Capital analyst Darren Shirley said the share placing and bond issue will be “dilutive to earnings in the short term”.
Shares in the grocer closed 19p down at 313p.