(Corrects headline to make clear source is newspaper)

BERLIN, May 26 (Reuters) - The Schwarz group that owns German discount supermarket chain Lidl plans to invest 6.5 billion euros ($7.3 billion)in 2016, with part of that going to sprucing up its stores in its home market, a newspaper reported on Thursday.

Lidl, and its German discounter rival Aldi, have become giants in European retail by keeping prices low with a strategy of selling mostly own-brand goods stacked on pallets in no-frills stores with minimal staff.

While their fast growth elsewhere in Europe still poses a threat to the likes Tesco and Carrefour, the discounters are losing market share to supermarkets at home, prompting both to offer more branded and fresh products and to invest in making their stores more attractive.

The Schwarz group, which owns Lidl and Kaufland hypermarkets, will invest the 6.5 billion euros in both chains, the company told the Heilbronner Stimme newspaper.

Lidl will invest more than 3 billion euros in the next five years just in its 3,200 stores in Germany, the chain’s boss Sven Seidel told the newspaper.

Lidl, which plans to follow Aldi into the U.S. market in 2018, saw its sales rise 9.5 percent to 64.6 billion euros in the fiscal year to the end of February, the paper said.

Total Schwarz group sales should rise to 90 billion euros in the current fiscal year after an increase of 8 percent to 85.7 billion euros in 2015/16, the company told the paper.

Based in Neckarsulm in southern Germany, Lidl now runs more than 10,000 stores in Europe and is owned by Germany’s richest man, Dieter Schwarz, son of the company’s founder Josef Schwarz.