MORRISONS has confirmed its exit from the convenience sector in a deal that will cost the supermarket group £30m.
It has sold 140 M Local stores to a team led by Mike Greene, a retail entrepreneur whose career has been spent in the convenience sector, and backed by Greybull Capital.
The deal is for £25m in cash, although Morrisons estimates it will incur a loss of £30m on disposal and has contigent liabilities on lease obligations of up to £20m, should the new business fail.
It ends a sorry chapter for the Bradford-based group, which failed to grasp the opportunity of convenience stores when its rivals seized market share and invariably the best locations. When it eventually decided to move, it was an expensive entry into an established marketplace.
Although Morrisons expected the M Local stores to reduce its losses by more than one-third from £36m to £23m in the current year, the decision was taken to jettison the chain. It will keep just five M local stores, which are either on forecourts or will be converted to small Morrisons supermarkets.
Morrisons chief executive David Potts said: “Convenience is a large and growing channel in UK food retailing. Morrisons learnt much from its entry into the market, but M local was unable to scale. However, we remain open to other opportunities in convenience in the future.”
The announcement comes a day before the retailer announces its half-year figures that are expected to show total revenues down around 5% to £8.1bn with pre-tax profits forecast to fall by 40% to £140m.
The man fronting the purchase is Mr Greene, the former chairman of the Association of Convenience Stores.
Mr Greene, who appeared on Channel 4’s Secret Millionaire programme in 2011, has had a long career in retail, working for Spar, Shell UK in the 1990s as petrol stations became convenience stores, before spending 10 years running the retail consultancy him!. He currently has a number of consultancy roles and directorships.
Morrisons was advised by a team from Eversheds which was led by Leeds-based real estate partner Susan Samuel and corporate partner James Trevis, and included principal associate Claire Burns.
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