Morrisons to close 11 slumping supermarkets

MORRISONS yesterday revealed plans to close 11 loss-making supermarkets putting 900 jobs at risk, as the third biggest food retailer in Scotland posted a 35 per cent plunge in profits to a nine‑year low.

Morrisons posted a slump in first-half profits
Morrisons posted a slump in first-half profits

Underlying pre-tax profits at the group fell to £117 million in the six months to 2 August as fierce price wars continued with Tesco, Asda, Sainsbury’s and the discounters Lidl and Aldi.

David Potts, who succeeded the ousted Dalton Philips as chief executive at Morrisons last March, warned yesterday that it would be a long journey to turn around the company, which has some 60 Scottish stores.

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“There are no quick fixes,” Potts said, as the interim dividend for shareholders was slashed to 1.5p from 4.03p.

He announced the sale of the company’s lossmaking M Local convenience store network to retail entrepreneur Mike Greene earlier this week to focus on the core business and building up its online offering.

Potts said the company had entered the fast-growing convenience store sector 15 years late in 2011, and opened in inconvenient locations.

The lesson from the experience, he said, was “don’t hang around”.

Morrisons did not disclose the location of the supermarkets being shut down, saying staff were being informed first. However, it is understood no Scottish outlets are affected. The move will result in a one-off cost of £20m.

Interim like-for-like sales fell 2.7 per cent, with the decline easing in the second quarter to 2.4 per cent from 2.9 per cent in Q1.

Potts said his priority in his first year would be to slow the group’s loss of market share and reduce the magnitude of same‑floorspace sales falls.

He said in recent years customers’ affection for the Morrisons brand “has been tested” and its identity of good, fresh produce at keen pricing “blurred”.

Potts added that volume growth was the key first plank in rectifying this perception, with shoppers’ experience trying to be improved via 5,000 additional staff in store and 10,000 rescheduled to be on the shopfloor at the busiest times of the week. About 700 jobs have gone at the Bradford head office.

Morrisons chairman Andrew Higginson has previously said it would take five years to turn the Bradford-based retailer around. But Potts said: “I have learnt from long and bitter experience not to combine a target with a year.”

The chief executive said he was pleased with the initial results from the group’s online venture with Ocado, another area that Morrisons has been deemed late into.

However, he would not be drawn on his commitment to the deal or if he wanted to supplement it. Potts said, in terms of digital sales, Morrisons would have to “follow the customer”, but that he was aware the company had no online operation currently in Scotland or parts of northern England.

“If we take Scotland we have 60 stores and no share at all of digital food retailing. Tesco has 64 per cent of the food retailing market on the internet in Scotland. We don’t serve it. I’m open-minded how we invest in the future.”

Separately, Potts declined to comment on recent takeover speculation surrounding Morrisons, with ​South African billionaire Christo Wiese ​renewing comments that he could look to invest in the UK supermarket sector.

Wiese has already taken over fashion chain New Look, gym chain Virgin Active and he holds a fifth of supermarket chain Iceland.