Morrisons mulls further store disposals

Yorkshire-based Morrisons has traditionally operated only large store formats, and running the smaller Safeway stores as a proposed convenience store unit would certainly have been an additional chore for the group already burdened with the integration of the two companies.

Britain's fourth largest supermarket group said it had been surprised at the level of interest in the smaller Safeway stores (all of which are less than 15,000 square feet) from other retailers at the time of the takeover back in March, prompting it to rethink its plans for the outlets.

The company gave no indication of how much it expected to receive for the stores, or whether it planned to sell them all as one package. All of Britain's leading High Street supermarket groups are likely to be among the bidders - chains such as Iceland, Waitrose, Co-op and Somerfield could all benefit from the rare opportunity to expand their businesses, especially with the larger groups (Asda, Sainsbury, Tesco) all likely to have offers ruled out on competition grounds, despite their growing interest in convenience retailing.

Focusing on the larger Safeway stores should certainly help Morrisons to achieve its goal of turning around the flagging performance at the acquired business, and the latest data from TNS Superpanel shows that it still has a long way to go. Safeway's market share in the 12 weeks to 20 June dropped to 7.8 per cent from 9.1 per cent a year earlier, despite the roll out of lower prices by the company's new owner. Sales dropped by 10 per cent to £1.3 million.

In contrast, Morrisons' own sales rose by 15 per cent in the same period to 1.05 million, taking its market share to 6.3 per cent from 5.7 per cent. Combined, the group saw sales almost identical to those a year earlier at £2.37 million.

Morrisons remains the best-performing retailer, according to the TNS data, with only market leader Tesco coming close with an 11 per cent rise in sales to £4.7 million, lifting its market share to 27.9 per cent from 26.5 per cent. Asda's sales rose 8 per cent during the quarter, while Sainsbury's dropped by 1 per cent.

Interestingly, given the low-price focus of most of the market leaders (Tesco, Asda, Morrisons), the performance of what has traditionally been Britain's most expensive supermarket group, Waitrose, also impressed. Sales were ahead 8 per cent, even before the inclusion of 19 stores it has already bought from Morrisons and the possible acquisition of a further package.