Morrisons announced yesterday that it was planning to close 132 of the 1,164 McColl’s convenience stores it bought out of administration earlier this year and convert most of the remainder to its Morrisons Daily format.
The decision puts up to 1,300 people at risk of redundancy, although the company stated that it would offer them all alternative employment within its wider business.
Since its acquisition in May, McColl’s has been run independently during an investigation by the Competition and Markets Authority (CMA). This ended last week when the regulator accepted Morrisons’ offer to sell 28 stores to overcome competition concerns.
“We are now able to begin the urgent journey to transform McColl’s into a viable, well-invested and growing operation,” said David Potts, Chief Executive of Morrisons.
Morrisons revealed that the 132 stores being closed had been lossmaking for some time, with “no realistic prospect of achieving a break-even position in the medium term”.
Most will shut by the end of the year, although 55 stores that also contain a Post Office will be kept open until 2023.
Joseph Sutton, convenience, online and wholesale director at Morrisons, stated that the move was “an important step towards the regeneration of the business”.
The remaining stores will be converted to the Morrisons Daily format, which was already being rolled out across the McColl’s estate before it fell into administration. This process is expected to take two to three years.
Since McColl’s began rebranding its stores under the Morrisons name in 2019, like-for-like sales in the 286 converted stores have increased by around a fifth. “Over the past three years, we have seen the significant enhancements that the conversion of a McColl’s store to a Morrisons Daily can achieve,” said Potts.
He stated that the addition of McColl’s – which has annual sales of over £1bn – to Morrisons would “unlock significant synergies throughout the supply chain” that would lead to “significant investment in price” across both brands.
McColl’s sales will now be consolidated within Morrisons’ retail revenue, potentially helping it regain its position as the UK’s fourth-largest grocer having recently lost it to Aldi.
Meanwhile, it was also announced that McColl’s interim Chief Executive Karen Bird and Chief Financial Officer Giles David will be leaving the business.
NAM Implications:
- The key is Morrisons ability to shed unprofitable McColl’s stores…
- …when adding the rest of the estate to the Morrisons brand…
- …without diluting overall profitability.
- More importantly, much of McColl’s £1bn turnover will add to Morrisons sales…
- …possibly taking the group back to Mult 4 status.
- Meanwhile, an opportunity/incentive for Aldi to hold onto No.4?
- Either way, another reason for suppliers to find a way of working with the discounters?
