J Sainsbury is to raise £445m from investors to help increase the rate of growth of its store space, the supermarkets group said on Wednesday, as it reported sales growth of 7.8 per cent in the last quarter on the back of strong demand for its clothing range.

Shares in Sainsbury fell 5.65 per cent or 18¾p to 313p. The capital raising will be split between a placing of approximately £225m of new shares, and a convertible bond offering of £190m. Rumours in the market suggested that the placing is priced at 310p a share.

The money will be used to increase store space by 15 per cent in the two years to March 2011 with 40 per cent of the new space devoted to non-food items. Sainsbury had previously been officially targeting a more modest rate of 10 per cent growth in store space in the three years to March 2010.

The new plans will add 2.5m sq ft in retail space to its current 16m sq ft store space.