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Morrisons to close 11 supermarkets with 900 jobs under threat

Published 10/09/2015

Morrisons faces a
Morrisons faces a "long journey" to turn around its fortunes, its chief executive says

Struggling supermarket Morrisons has announced the closure of 11 supermarkets putting 900 jobs at risk as it reported its latest slump in profits.

Pre-tax profits for the half-year to August 2 fell 47% to £126 million while like-for-like sales for the period dropped 2.7% compared with the same period last year.

New chief executive David Potts said the group faced a "long journey" to turn around its fortunes.

It comes a day after Morrisons said it was selling 140 M local convenience stores for around £25 million to concentrate on its larger supermarkets.

Mr Potts said: "With great regret we are proposing to close 11 supermarkets. This is a difficult decision but one which we cannot see any way through to make those stores viable."

The closures are in addition to 10 supermarkets shut earlier this year. Morrisons had also announced earlier this year that it was shutting 23 M local stores.

Mr Potts said the closures being set out today were mainly smaller-sized supermarkets. He would not disclose the location of the sites straight away with the decision only just being announced to staff.

The move will result in a one-off cost of £20 million.

Mr Potts said of the firm's turnaround plans: "This will be a long and challenging journey but an important one for one of Britain's great retailers."

Morrisons said it had opened just one new store this year and did not plan to open any more in the remainder of 2015/16 while it expected the sales contribution from net new stores to be negative.

Latest figures come as supermarkets continue to fight a fierce price war, with Morrisons and Big Four rivals Tesco, Asda and Sainsbury's squeezed by discounters Aldi and Lidl.

Morrisons signalled further gloom as, despite the economic recovery bringing greater consumer confidence and wage growth, boosted by low fuel costs, supermarket prices remained under pressure as customers continued to seek bargains.

The group said: "We have seen no change in shopping habits, with customers continuing to shop around for value and shopping more frequently.

"In addition, as we continue to lower prices, deflation has been a consistent recent feature of our LFL (like-for-like sales).

"Although some commentators predict the return of food price inflation, driven perhaps by higher global commodity prices, we expect deflation to continue as we keep investing in our proposition."

Morrisons is selling its M local store network to retail entrepreneur Mike Greene, who plans to keep all 2,300 staff and create 200 further jobs by opening 10 more stores.

Mr Potts said Morrisons had been 15 years late entering the convenience store sector in 2011 and added that one lesson from its experience was "don't hang around".

He said the best sites for such stores had already gone and was critical of the way his predecessors had assembled the smaller store network.

"It is a bit like when you buy a house - location, location, location is important. It's like that doubly when you buy a supermarket, trebly at a convenience site, by dint of its definition - it has to be convenient, not inconvenient."

Morrisons has also faced questions over the rationale behind its £170 million tie-up with Ocado to enable it to enter the online grocery market last year.

Mr Potts said: "It is a good start with Ocado. It is a significant investment but it is a growth market."

He said Morrisons needed to look at how it could reach more than the 52% of Britain already covered for online deliveries and achieve its business case for the deal.

The group outlined a series of key priorities including being more competitive, serving customers better, simplifying the organisation and to "make the core supermarkets strong again".

Mr Potts said: "The immediate priority is to deliver a better shopping trip to stabilise trading performance."

The group saw like-for-like sales down 2.4% in the second quarter but this was an improvement on the first quarter drop of 2.9%. In the second quarter a year ago, there was a decline of 7.6%.

Morrisons said: "Customers and colleagues are beginning to notice improvements, but the turnaround will take time and require sustained investment."

The company expects underlying profits in the second half of the year to be higher than the first.

Shares fell 3% as the latest figures missed some analysts' expectations.

Bernstein analyst Bruno Monteyne said: "It is still unclear how they will compete on price against Aldi, Lidl and Asda and on service against Sainsbury's or Tesco.

"Until we see the first signs of a retail proposition that has consumer appeal and that has been well costed we do not anticipate margin improvements at the true underlying level."

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