Rival accuses Tesco of overpaying for T&S stores

A senior Sainsbury's staffer has suggested that arch-rival Tesco overpaid for T&S Stores, the c-store chain that cost the retailer£377 million.

Sainsbury's location planning manager Marcus Muktarsingh said at a conference in London that Tesco would have to treble sales at T&S if it was to get a 'payback'.

He confirmed that Sainsbury's had run a slide rule over the c-store group and calculated that Tesco would have to increase sales dramatically at each T&S store from£19,000 a week to nearer£60,000.

Explaining why Sainsbury's had not made any acquisitive move in the convenience sector, Muktarsingh said: 'The quality of the assets out there are pretty substandard.'

However, Numis retail analyst Mark Hughes said that only looking at trebling sales to get a return on the T&S deal was 'waffle'. He suggested that margin and profit densities provided many more opportunities for Tesco.

'There is big room for buying benefits and better sourced products,' he said.

While Hughes believes Tesco will increase sales - perhaps to£35,000 a week - the main gains are likely to come from improving the operating margin at T&S from 5.5 per cent to nearer the 6 per cent achieved at Tesco.

He also believes that Tesco could have offered another 50p per share for T&S and still made the deal pay. 'I'm surprised that Sainsbury's didn't come back at them. It should have counter-bid,' said Hughes.

Muktarsingh said Sainsbury's preferred instead to focus on the roll-out of its Local stores. Sainsbury's intends to open approximately 24 Locals this year.