Morrisons 'baffled' to be named UK's worst shop

Morrisons leaves door open to small stores as it sells M Local

9 September

Embattled 'big four' supermarket chain Morrisons has announced the sale of its M Local convenience store business, but has left the door open for a return to the lucrative convenience sector in the future.

The portfolio of around 140 outlets has been sold to a team led by small-store retail veteran Mike Greene and backed by investor group Greybull Capital. Following the buyout, which has been the subject of rumours for a number of weeks, Morrisons will "incur a loss… of around £30m" to the balance sheet value of the shops, says City AM.

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M Local was expected to fetch up to £50m. The units collectively generate revenue of between £250m to £350m, but are subject to high rental costs and the business only makes a modest profit. Greybull said in a written statement it would not close any of the stores, "safeguarding" 2,300 jobs, and that 200 further positions would be created as ten stores which are currently closed will be re-opened.

Morrisons has admitted that its belated entry to the convenience sector has been a flop. In an attempt to catch up with rivals Tesco and Sainsbury's, which already had a strong presence, the company bought a portfolio of 50 stores from Blockbuster following the collapse of the video rental chain, and expanded aggressively. Many of its sites were in premium locations which commanded high rents.

But some analysts still question the wisdom of exiting a market that has been a major success for other retailers – and one of the few areas of growth for larger grocers. Morrisons seemed to acknowledge this by leaving open the possibility of a return later, saying it had been "unable to build scale" but that it would "remain open to other opportunities in convenience in the future".

Morrisons has kept five of the stores in the portfolio, which were on petrol forecourts or which will be turned into "miniature versions" of its supermarkets. Its shares were up 3.5 per cent on Wednesday afternoon.

Morrisons could receive £50m from M Local sale

07 September

'Big four' supermarket group Morrisons could be set to generate anywhere up to £50m from the expected sale of its convenience store M Local business, which could be revealed as soon as this week.

On Saturday, the Daily Telegraph said that senior managers at the UK's third largest grocer would be locked in talks with buyout frontrunner Greybull Capital over the weekend, to "to seal a deal before it updates the City on a slump in profits on Thursday". It says the unit, which is thought to generate "a small profit" on up to £350m in sales, could fetch between £30m and £50m.

While the price is not huge, it could part of a "back to basics" shake-up refocusing on the core supermarket offering presented when chief executive David Potts reveals first-half results later this week. He is expected to say that profits have fallen from £239m last year to £141m.

While some analysts say the wider market dynamic makes a decision to exit the convenience sector questionable, Morrisons' small stores are widely regarded as a flop as a result of a "scattergun" approach that has seen it shell out huge rents for premium locations.

The changes could also see Potts review the company's online operations, which are a joint venture with online-only retailer Ocado, and the firm's complex loyalty card scheme, which has been the subject of complaints from rivals and criticism from analysts.

Last week, Morrisons shares jumped as speculation mounted that its prolonged slump – share price has fallen by around half from a peak of 326p in 2011 – could make it a buyout target, with UBS upgrading the stock to a buy. South African billionaire Christo Wiese, a retail consolidator who already owns New Look and a stake in Iceland, hinted to The Telegraph that he might be interested in buying into the UK supermarket sector, with Morrisons seen as a potential acquisition.

Morrisons wins advertising regulator ruling – mostly

26 September

Morrisons has escaped largely unscathed after a lengthy investigation by the advertising watchdog into a price-match scheme branded "complex" by analysts and dismissed as misleading by rival Aldi.

The Advertising Standards Authority "overruled" the "main body" of a complaint made by Aldi ten months ago over Morrisons' Match & More scheme, The Independent reports. It said the 'big four' grocer did not omit information "or give a misleading impression of how the price-match scheme worked" and that the scheme operated "in line with consumer expectations".

Aldi claims the scheme is "not transparent and [does] not serve the best interests of consumers". The Guardian explains prices on equivalent products at Tesco, Sainsbury's, Aldi and Lidl that are within 20 per cent of the weight and size of Morrisons' own are compared online and, in the case of Aldi and Lidl, in person twice a week. On shops of above £15 the price difference across the whole basket of purchased goods is refunded to the consumer in points that can be converted into vouchers.

Critics have said the scheme is too complex – and Aldi maintained the "scheme did not price match" effectively with its stores. Morrisons' chief executive David Potts has previously said the loyalty scheme "is under review".

The ASA did uphold one complaint "made by Aldi and five members of the public" that Morrisons had "breached the advertising code because it did not provide sufficient information for customers" to check comparisons. It has been ordered to provide information on its website to enable customers to check "how points relating to the scheme had been awarded for a specific shop".

Morrisons is currently struggling to turn around a disappointing performance and is simplifying its offering, reportedly lining up a sale of its smaller convenience store estate. Figures published on Tuesday revealed like-for-like sales fell 1.1 per cent over the summer months compared with last year.

Morrisons could be on the hook for millions after M Local sale

20 August

Big four supermarket group Morrisons' plan to offload its estate of more than 150 town centre convenience stores may leave it with a liability of as much as £100m against future store closures.

The Guardian reports the existence of "a parent company guarantee on the rental agreement for the stores", which means the group is liable if leases are terminated before the end of their term. So if the new owners decide to cull dozens of stores which aren't pulling their weight in profit terms, it is Morrisons that will have to pick up the bill.

"Morrisons will have to recognise the liability by booking a writedown in its accounts." The maximum hit is estimated by industry sources at £100m, but the firm is likely to book a loss of tens of millions of pounds "because the structure of the sale should partly offset the damage".

A sale could be confirmed by the retailer as soon as its result next month, with reports suggesting that turnaround investor Greybull Capital is still the frontrunner to secure the portfolio. The Daily Telegraph has revealed its bid is being fronted by convenience store veteran Mike Greene, who has twice been chairman of the Association of Convenience Stores, and could see an investment of "tens of millions of pounds" into the business.

While the smaller stores format has not yet worked for Morrisons, and has been criticised as an expensive "scattergun" approach to a sector in which rivals Tesco and Sainsbury's already have a strong foothold, some analysts still argue that an outright exit from a major area of growth is imprudent.

The Motley Fool says "convenience stores are one way to preserve market share" and "it's hard to see how Morrisons could be better off without them". Smaller stores have been cited as a key reason for Sainsbury's recent resilience in the face of disruption in the sector, and the return to sales growth for Co-operative.

Morrisons shares have fallen consistently since reports emerged of the M Local sale on Monday and are down around 5 per cent for the week at 168.5p.

Morrisons set to sell 150 smaller stores

13 August

'Big four' supermarket group WM Morrisons is preparing to sell off its estate of 150-160 convenience stores as its new chief executive begins an overhaul to turn around poor recent performance.

The Daily Telegraph says the supermarket group is "in advanced talks" over a sale of the M Local stores, with Greybull Capital said to be the frontrunner from a number of bidders. The investment firm, best known for a "dramatic rescue" of Monarch Airlines last year that saw it pay £125m to stave off bankruptcy, has assembled "a mystery team of industry executives" to run the business.

Selling the convenience stores may appear an odd move at a time when sales through smaller stores have been one of the few areas of growth for the major supermarkets in the face of huge sector disruption from discounters Aldi and Lidl. Convenience store sales were the main reason Co-operative has returned to sales growth and have been cited as a key reason for the relative resilience of one of Sainsbury's, one of Morrisons biggest rivals, of late.

But the Telegraph notes analyst criticism of what was seen as a "scattergun" approach to smaller store openings by Morrisons. It "moved into the sector later than … Tesco and Sainsbury’s and had been trying to catch up by opening 100 stores a year", but it was forced to pay high rental costs to secure prime retail spots and has admitted 30 per cent of openings "did not work".

The Financial Times cites one industry insider saying high street stores were "losing a packet" because of "monster rents on suburban high streets". The supermarket already announced a moratorium on new openings and 23 closures earlier this year, at its results revealed profits had slumped by more than 50 per cent to £345m.

Morrisons' move comes as hostilities in the supermarket price war are set to resume, with the Telegraph pointing to a rollout of the Sainsbury's 'brand match' pledge to online sales, a "more aggressive attack" on prices from Tesco, and looming school stationary and uniform discounts ahead of the September restart. The FT says price cuts could be a "bigger priority" for Morrisons' new chief executive David Potts as part of his revival plans.