- Morrison to Focus on Improving Sales at Larger Supermarkets
- Grocer Turning Its Back on Fast-Growing Convenience Market
Mike Greene, a U.K. retail veteran known for his appearances on the television program Secret Millionaire, is leading the acquisition of almost all of Wm Morrison Supermarkets Plc’s unprofitable convenience-store chain.
Greene, backed by private-equity firm Greybull Capital LLP, will acquire 140 M Local outlets for about 25 million pounds ($38 million) in cash, Morrison said in a statement Wednesday.
Morrison, which is due to report first-half earnings Thursday, is selling all but five of its convenience stores, exiting a faster-growing section of the grocery market to focus on its main business of larger supermarkets. The divestment comes about six months into the tenure of Chief Executive Officer David Potts as he seeks to fight back against discount competitors.
“Morrisons learnt much from its entry into the market, but M local was unable to scale," Potts said in the statement. “We remain open to other opportunities in convenience in the future."
The shares rose 3.6 percent to 176.1 pence at 2:56 p.m. in London.
Morrison’s move goes against the current trend in the U.K. retail sector. Rival J Sainsbury Plc is opening new convenience stores, while Booker Group expects to complete its 40 million-pound acquisition of the Londis and Budgens chains this month. Sales at U.K. convenience stores rose by more than 5 percent in the last year, taking its total value to 37.7 billion pounds, according to the Association of Convenience Stores.
The sale isn’t the first bold decision taken by Potts since he started in March. Soon after joining, he announced almost half of the grocer’s senior management team would be leaving, before eliminating almost a third of 2,300 head office roles. In a back-to-basics approach, he has diverted resources to supermarkets, where further price cuts have been made and an additional 5,000 shop-floor workers are being hired.
“Putting convenience on hold is fully understandable and right,” Bruno Monteyne, an analyst with Sanford C. Bernstein, said by phone. “It is
indicative of the deep changes the management team will have to make to put
Morrisons back on track, but it’s hard to celebrate this."
Under former CEO Dalton Philips, Morrison acquired dozens of convenience stores in a single transaction from movie-rental chain Blockbuster, which went into administration in 2013. After undertaking a review this year, the grocer said the business would have required significant further investment to reach profitability.
The stores will be rebranded as “My Local” under Greene, who has twice been chairman of the Association of Convenience Stores, an industry lobby group.
“He certainly knows and understands convenience, particularly in the U.K.,” said Neil Stern, a senior partner at retail industry consultant McMillan Doolittle in Chicago.
Morrison, based in Bradford, England, said it expects to book a 30 million-pound loss on the sale.