Morrisons has agreed to sell 140 M local convenience stores for a consideration of c. £25m in cash, to a team led by retail entrepreneur Mike Greene and backed by Greybull Capital LLP. Morrisons will retain five M local stores, which are either on forecourts or will be converted to small Morrisons supermarkets.
In March 2015, Morrisons announced a review of the M local business. That review concluded that M local would have required significant further investment in new sites, plus additional capital expenditure and lease commitments, to reach profitability. In the Board's opinion, today's sale announcement represents the best solution for Morrisons and will enable future Morrisons investment to be focused on core supermarkets.
Morrisons expects to incur a loss on disposal of around £30m. In addition, Morrisons retains a guarantee on individual lease obligations, which could revert to Morrisons if the new business does not succeed. The residual contingent liability in this event is estimated at up to £20m.
In 2014/15, the M local stores to be sold recorded an operating loss1 of £36m, and gross assets2 were £68m. For 2015/16, the stores' budgeted operating loss1 was £23m.
David Potts, Morrisons CEO, 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. I would like to thank all the Morrisons colleagues for their hard work and dedication to M local."
Published 09/09/15