Sainsbury's Could Shut Up To 200 Argos Stores

The plan would see outlets closed and relocated as concessions occupying under-used space within big Sainsbury's supermarkets.

Details of the potential shake-up emerged as Sainsbury's set out its case for a potential £1bn-plus move for Home Retail Group, which also owns DIY chain Homebase.

Sainsbury's said it was still considering its position after it took the market by surprise last week when it revealed it had made an initial offer in November, which was rebuffed. It has until 2 February to renew its approach.

The supermarket set out the rationale for any deal in a 21-page presentation to investors at the same time as it published a Christmas trading update on Wednesday.

This centres on accelerating its growth strategy by getting its hands on Argos's home delivery and digital expertise.

Chief executive Mike Coupe also said that around half of Argos' 734 stores have leases expiring in the next five years and some would close if a deal materialised.

Sky News understands that between 150 and 200 Argos stores could be impacted. 

The UK's second-biggest supermarket said the takeover was a "strategically compelling transaction", which would allow it to take on the might of rivals such as Amazon, with more than 100,000 general merchandise products between Argos and Sainsbury's.

A Sainsbury's and Argos tie-up would oversee a £6bn non-food business putting it in the same league as John Lewis and M&S.

Mr Coupe remained tight-lipped on his plans for Homebase - the business Sainsbury's had owned until 2000 - renewing speculation that it would be spun off should a deal come to fruition. 

Home Retail Group shares were 5% higher on the back of the reiterated interest, and have risen nearly 50% since Sainsbury's first announced its intentions a little over a week ago. 

Alongside the Argos update Sainsbury's issued its Christmas sales figures which showed that like-for-like sales dipped 0.4%, falling short of analysts' expectations for a small rise.

The fall in sales could be attributed to the store's decision to reduce levels of vouchering and promotional activity. It also reduced the number of multi-buys in favour of lower regular prices.

Mr Coupe, said: "We have traded well during the festive period in a highly competitive market."

Sainsbury's 757-strong convenience outlets enjoyed a record sales day on Christmas Eve while online sales grew by nearly 10% over the period. Despite the unseasonably warm weather, clothing sales grew by nearly 6%. 

Britain's big supermarkets have been under pressure from the advance of discounters Aldi and Lidl but some analysts have begun to think their fortunes may be improving. 

Commenting on signs of an upturn, Mr Coupe said that "perhaps the tide has gone out as far as it can go".

Sainsbury's shares were 1% lower .