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Chain fails to reach profitability

Morrisons takes £30m hit as it sells convenience stores

MorrisonsMorrisons has agreed to sell 140 M local convenience stores for £25 million in cash to a team led by retail entrepreneur Mike Greene and backed by Greybull Capital.

The supermarket chain will retain five M local stores which are either on forecourts or will be converted to small Morrisons supermarkets. The company expects to incur a loss of around £30m on the sale.

In March the company announced a review of the M local business which concluded that M local would have required significant further investment in new sites, plus additional capital expenditure and lease commitments, to reach profitability.

In a statement the company said: “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.”

In 2014/15, the M local stores to be sold recorded an operating loss of £36m. Its gross assets were £68m. For 2015/16, the stores’ budgeted operating loss was £23m.

David Potts, Morrisons chief executive, 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.”

Analysts are likely to see the sale as an admission by Morrisons that it entered the convenience store market too late and was alway playing catch up with market leaders Tesco and Sainsbury’s. The latter now has more convenience stores than supermarkets.

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