Sainsbury’s has finalized a significant acquisition, agreeing to purchase ten Homebase locations to transform them into supermarkets.

The deal will increase Sainsbury’s retail space by 235,000 square feet, strategically positioning the new stores in “key target locations” throughout England, Northern Ireland, and Scotland.

With an estimated gross investment of £130 million, the acquisition is set for completion early next month.

The new supermarket locations will include sites in Sutton Coldfield, Bromsgrove, Cromer, Londonderry, Fareham, Inverurie, Lowestoft, Newark, Omagh, and Rugby. This move is expected to bring Sainsbury’s within a ten-minute drive for nearly 400,000 additional customers.

This acquisition follows the news that Hilco Capital, which purchased Homebase for just £1 in 2018, is considering selling the struggling DIY chain. Hilco is reportedly in discussions with several potential buyers, including competitors The Range and B&M European Value Retail.

Simon Roberts, CEO of Sainsbury’s, stated, “Sainsbury’s food business continues to go from strength to strength. We want to build on this momentum, which is why we are expanding our supermarket presence. Our goal is to be the first choice for customers seeking food, and these new stores will enable us to serve even more communities across the UK with our best offerings.”

As the second largest grocery retailer in the UK with a 15.3 percent market share, trailing only Tesco, Sainsbury’s anticipates that the new locations will deliver strong financial returns, expecting a return on capital employed in the low teens, exceeding their capital costs.

The first of the newly converted stores is projected to open next summer, with all ten stores expected to be operational by the end of 2025. Currently, Sainsbury’s operates over 600 supermarkets and around 800 convenience stores, processing nearly 250,000 online orders weekly.

In addition to expanding its presence, the conversion is expected to generate approximately 1,000 jobs. Sainsbury’s has committed to guaranteeing interviews for Homebase employees who may be affected by store closures.

This strategic move aligns with Sainsbury’s “food first” strategy aimed at consolidating its clothing and general merchandise units, which have faced challenges. The retailer announced in March plans to eliminate about 1,500 positions as part of a broader initiative to streamline operations and save £1 billion in costs over the next three years. This realignment is part of Sainsbury’s “next level” strategy to adjust business size and increase food space across 180 stores by reallocating areas currently used for non-food items.

Retail analyst Clive Black from Shore Capital praised the initiative, noting, “I am very impressed by the progress of Sainsbury’s grocery operations under Simon Roberts, evident in profit advancements and market share growth. This move should enhance medium-term earnings and cash flow, reflecting Sainsbury’s commitment to controlled growth and improved returns.”

In the first quarter of the fiscal year, Sainsbury’s reported a 2.7 percent increase in like-for-like sales, compared to a much higher 9.8 percent increase in the same quarter last year. Grocery sales decreased to 4.8 percent from 7.3 percent in the previous quarter, primarily due to easing inflation. The Argos division experienced a decline of 6.2 percent in sales.

Sainsbury’s shares rose by 1.5p, or 0.5 percent, closing at 290p.