Morrisons sells 140 convenience stores for cut-price GBP25m
Morrison Supermarkets has confirmed the sale of 140 convenience stores for £25m, half the amount the grocer was said to have expected.
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Morrisons admitted that it also expected to incur a loss on disposal of around £30m and may also be liable for a further £20m due to a guarantee on individual lease obligations, which could revert to Morrisons if the new business does not succeed.
As recently as last weekend, it was reported that the group was hoping to rake in £30m to £50m for the stores.
The M Local stores were sold to private equity group Greybull Capital, whose bid was headed by convenience retail veteran Mike Greene.
Morrisons said it would retain five M local stores, which are either on petrol forecourts or will be converted to small Morrisons supermarkets.
In 2014/15, the M local stores to be sold recorded an operating loss of £36m, according to the company, and gross assets were £68m. For 2015/16, the stores’ budgeted operating loss was £23m.
At the time of interim results in March, Morrisons said it would conduct a review of the convenience arm, as well as slowing the rate of new openings significantly in order to use the cash to maintain and update its core store estate.
Chief executive David Potts, who took the reins in March this year, said: “Convenience is a large and growing channel in UK food retailing. Morrisons learnt much from its entry into the market, but M local was unable to scale. However, we remain open to other opportunities in convenience in the future. I would like to thank all the Morrisons colleagues for their hard work and dedication to M local.”
Shares in Morrison's were on the up from the get-go on Wednesday, ahead of interim numbers the following day, of which UBS said "the focus of the day is likely to be strategy over numbers".
Barclays Capital analysts agreed that the results will be notable for Potts' first appearance: "Having arrived in mid-March, we expect him to outline his thoughts on the state of the business and how best to take it forward. We expect Mr Potts to be very focused on the retail basics, which will likely involve investment in price, quality and service. While this may be the right way forward, we are wary of the profit impact and doubtful that the pain can be significantly mitigated by incremental cash generation."