Britain’s fourth biggest supermarket group Morrisons has warned it would take a long time to rebuild after a 35% slump in first-half profit to its lowest level in nine years underscored the scale of the challenge.
Those savings were in part achieved by “delayering the business” (cutting management, including 720 head office jobs and reducing the leadership team from 110 to 65), though ditching its loss-making supermarkets and expensive convenience stores won’t exactly hurt Morrison’s full year costs either.
Pre-tax profits for the half-year to August 2 fell 47 per cent to £126 million while like-for-like sales for the period dropped 2.7 per cent compared with the same period a year ago.
Morrisons superstores in South Devon may be under threat of closure as the chain announces plans to close 11 of its stores.
Morrisons said 140 of the stores would be sold for £25 million (34.4 million euros, $38.4 million) to a team led by retail entrepreneur Mike Greene and backed by Greybull Capital LLP. The company has also booked a loss of £30m on the sale of its M Local stores and is on the hook for a further £20m in rental payments if the stores fail under their new owners.
There are around 670 Morrisons stores – including about 150 convenience stores – and it is understood the closures would mainly be smaller-sized supermarkets.
“Time is of the essence and a poor Q3 trading would put them in a very weak position so we will be watching for some quick decisions from Potts in the coming weeks”.
Shore Capital and Begbies Traynor both said ceo David Potts was in for the long haul as he tried to revive the retailers’ flagging fortunes.
The group said: ‘We have seen no change in shopping habits, with customers continuing to shop around for value and shopping more frequently.
Mr Philips was ousted 12 months after the announcement of a three-year £1 billion programme to cut prices to fight the supermarket price war.
Peter Macdiarmid/Getty ImagesMorrisons’ tennis-themed Wimbeldon branch during the annual tournament.Struggling supermarket Morrisons is still crumbling in on itself.
Morrisons said the store closures will result in a one-off cost of around £20 million.
Potts said the chain would focus on stabilising trading and then improving its core supermarkets.