Morrisons shuts stores as profits fall

Supermarket chain Morrisons is to close 11 stores with the potential loss of 900 jobs as part of plans to transform the company's fortunes.

It also reported a 47% drop in half-year pre-tax profit to £126m.

Chief executive David Potts, who started in March, said he regretted the proposed closure of the 11 stores.

"This is a difficult decision but one which we cannot see any way through to make those stores viable," he said.

The closures will be mainly smaller supermarkets, but Mr Potts would not disclose their locations because staff had not yet been informed.

On Wednesday the retailer said it was selling 140 loss-making "M" local convenience stores for about £25m.

The shops will be rebranded as "My Local". The 2,300 staff will be kept on, with an extra 200 jobs to be created by reopening 10 shops that are currently closed.

This forms part of the company's £1bn cost saving programme, as it now tries to concentrate on its core supermarket business.

Phil Dorrell, partner at consultants Retail Remedy, welcomed the sale of Morrisons' convenience stores.

"Now that the leaky bucket that was 'M' Local stores has been sold ... we should expect that Morrisons' profit future will look healthier," he said.

A day after the deal, Mike Greene, the chief executive of My Local, announced a five-year supply deal with convenience store chain Nisa Retail.

The agreement will allow My Local to buy fresh produce from Nisa, while also permitting individual stores to purchase from local and regional suppliers.

'Old-fashioned'

Morrisons remained cautious but optimistic about its future: "Customers and colleagues are beginning to notice improvements, but the turnaround will take time."

Like-for-like sales for the 26 weeks to period to 2 August dropped 2.7% compared with the same period last year.

Total turnover during the period was £8.1bn, falling 5.1% year-on-year.

"Morrisons stores are old-fashioned, not as cutting edge as their rivals but they are dragging themselves into the modern age," said Julie Palmer, retail analyst at Begbies Traynor.

She said although they are not as slick as their competitors they have an established supply chain and the provenance of their food was good.

Morrisons continued to fight a fierce price war with its big rivals Tesco, Asda and Sainsbury, which are all being squeezed by the discounters Aldi and Lidl.

Despite the economic recovery bringing greater consumer confidence, Morrisons said customers were still wanting value for money.

Shares in Morrrisons closed down 2.8% at 170.9p in the wake of the gloomy figures.