Morrisons goes 'aggressive' in its drive to buy stores

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The Independent Online

Morrisons is aggressively outbidding its rivals to secure new stores, particularly in the southern England, signalling the scale of its ambitions under chief executive Dalton Philips.

The Bradford-based grocer is on a mission to grab property for both standard supermarkets and conveniences stores, with its recent acquisitions of sites in Dorking and Croydon cited as examples of how it is splashing the cash, according to sources. One said: "Morrisons is distorting the market. They are being incredibly aggressive – the only winners are landlords."

However, sources at Morrisons pointed out that price was only one factor in it securing deals with developers and local authorities. People familiar with the situation suggested the grocer had enjoyed significant success in acquiring property because of the quality of its proposals in terms of investing in local economies and creating jobs.

Morrisons said in March that it was accelerating the new space it will open to 2.5 million sq ft over the next three years, with the South of England, where it remains under represented, a key focus. Perhaps more importantly, it emerged earlier this month that Morrisons had held early stage discussions with banking advisors over a potential £1.8bn bid for Iceland, the 780-store frozen food specialist.

The speed of change at Morrisons has been rapid since Mr Philips joined the grocer in March 2010 from the Canadian retailer Loblaw. For the year to 30 January 2011, Morrisons grew pre-tax profits by 13 per cent to £869m, on sales up 7 per cent to £16.5bn.

The grocer acquired Kiddicare, the online retailer of baby products, for £70m in February to launch its non-food online strategy. While Morrisons will use Kiddicare's technology platform for introducing a wider non-food offer, eye brows were raised at the purchase price of 23 times the online specialist's earnings. The following month Morrisons bought a 10 per cent stake in Fresh Direct, the New York-based online grocer, for £32m to gain expertise ahead of launching its own internet delivery food operation in London and the South East in 2013.

The grocer will also open its first convenience stores, under the M Local banner, in July along the M62 corridor. This new channel of growth will help Morrisons, which has a market share of 11.9 per cent, gradually close the gap on market leader Tesco's 30.7 per cent share, Asda's 17.2 per cent and Sainsbury's 16.3 per cent.

But the potential acquisition of Iceland – which accounts for 1.9 per cent of the market – would put a turbo charger under Morrisons' growth strategy. But whether it is a full-blown bid or the purchase of a large number of stores, the true extent of Morrisons' ambitions towards the frozen food retailer are not yet clear.

The sale process for Iceland is not slated to kick off officially until September. Furthermore, Malcolm Walker – the founder and chief executive of Iceland, who together with management holds a 23 per cent stake in the business – is keen to regain full control of Iceland. The collapsed Icelandic bank Landsbanki is selling its 67 per cent stake in the frozen food specialist. All of the UK's biggest supermarkets are likely to take a look at the store estate of Iceland.

Traditionally Morrisons, founded in Yorkshire in 1899 , was focused in the northern England, but after the takeover of Safeway in 2004, the company began to establish itself in the rest of the country. It now has some 403 superstores across the UK.