Morrisons steps up its supermarket sweep-out

Published on Tuesday 2 November 2004 12:10

Key points

• Store cuts follow 3bn Safeway acquisition

• Question mark raised over future of 170 jobs

• 45 of required 52 store sales deals now completed

Key quote

"Staff at the Dewsbury and Bond Street stores have been fully briefed and offered a choice of three options: transfer to another Safeway store, move to a Morrisons store or redundancy. Morrisons is working closely with all members of staff to find the best solution for each individual." - MORRISONS SPOKESPERSON

Story in full SUPERMARKET group Morrisons has moved a step closer to completing the 52 store disposals required by competition officials following a review of its multi-billion-pound acquisition of rival Safeway.

However, the latest announcement, involving two outlets south of the Border, has raised a question mark over the future of up to 170 jobs.

The Bradford-based chain, which acquired Safeway for 3 billion earlier this year, said it would close one outlet at Bond Street, Leeds, and sell another store in Dewsbury, West Yorkshire, to a buyer which does not intend to take on the staff. It said the workers at the two sites had been offered the chance to transfer to other stores within the enlarged group or accept redundancy.

Discount supermarket chain Lidl has agreed to buy the outlet in Dewsbury but does not require the staff as it plans to redevelop the site over a period of time.

At Leeds, Morrisons will close the store on November 13 because it had been unable to renew the lease with the landlord. The assets at Dewsbury have a book value of 5.3 million while the Leeds outlet is valued at just under 1.8m.

A spokesman for Morrisons said: "Staff at the Dewsbury and Bond Street stores have been fully briefed and offered a choice of three options: transfer to another Safeway store, move to a Morrisons store or redundancy.

"Morrisons is working closely with all members of staff to find the best solution for each individual."

The Office of Fair Trading (OFT) required Morrisons to offload 52 stores to satisfy competition laws. So far, the company has arranged to sell 45 of the regulatory disposals together with a handful of unrelated commercial transactions. Among the deals completed to date, the group has sold 14 outlets each to Waitrose and Sainsbury’s and another ten to market leader Tesco.

Last week, Morrisons confirmed it was selling 114 Safeway Compact outlets to the UK’s fifth biggest grocer, Somerfield.

The deal involves selling 63 of the stores directly to Somerfield for 115m while the remainder, together with a distribution centre, are being acquired by Northwharf Investments - a firm partly owned by Barclays Bank - for just over 145m. Northwharf plans to lease its properties to Somerfield.

Morrisons joint managing director Bob Stott said the disposal, which encompasses 59 outlets north of the Border, including two in the Capital, would allow the group to concentrate on running its larger out-of-town stores and help speed up the rebranding of the Safeway estate.

Two of the 114 stores count towards the OFT undertakings.

Morrisons issued the first profit warning in its 37-year history as a listed company on July 2, blaming falling sales at Safeway.

But last month chairman Sir Ken Morrison reassured investors that the store conversion programme would be "largely completed" by the end of 2005.

The family-run group won a protracted takeover battle pitted against rivals Sainsbury’s, Tesco and Asda to buy Safeway after competition regulators blocked the larger firms’ bids.

• Tesco has reported underlying sales growth of 4.9 per cent in Korea and 1.1 per cent in Thailand during its third quarter.