Credit: Rept0n1x/Wikipedia

Morrisons prepares to retreat from convenience market

Boss David Potts is reportedly in advanced talks to sell the supermarket's M Local stores.

by Adam Gale
Last Updated: 05 Nov 2015

When David Potts took the helm at Morrisons in March, he wasted little time changing course, chucking former boss Dalton Philips’ exotic vegetable-misters and 23 of his convenience stores overboard in the process. Five months on, and it seems Potts is preparing to finish what he started and jettison the remaining 150-160 M Local stores.

According to the Telegraph, Morrisons is in ‘advanced talks’ with investment firm Greybull Capital to sell its convenience division, though neither firm has yet commented.

Philips went full steam ahead into the high street, well after Tesco and the gang, in an effort to find a refuge from prowling, ultra-low cost destroyers Aldi and Lidl. With a crowded market and high rents, it’s proved far from plain sailing, however. Back in March, chairman Andy Higginson said ‘upwards of 30%’ of the local stores weren’t working.

As chief executive, Potts believes Morrisons needs to focus on what it’s good at (cheap supermarkets, apparently). Having already rid the firm of what were presumably its worst performing branches and stopped Philips’ expansion plan, this proposed sale would mark the completion of a coherent change in strategy.

Time will tell whether it’s the right decision. If the supermarket price war is a storm that will eventually pass, then perhaps it wouldn’t be smart to retreat from a potentially lucrative market. If, on the other hand, the rise of Aldi and Lidl has permanently changed the dynamics of the groceries sector, then battening down the hatches makes abundant sense.

There are some signs of hope. According to the most recent Kantar sales figures, Morrisons appears to have stopped the rot in its market share, which at 10.9% is the same as it was in May 2014. In December 2012 it was 11.9%. It's far too early to say that Aldi and Lidl's rise at the expense of the Big Four is over yet, however. Investors appear hesitant, sending Morrisons shares down1.2% to 175.7p this morning.

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