Morrisons sells 10 Safeway stores to Tesco

WM Morrison yesterday sold 10 Safeway stores to its larger rival Tesco with a book value of £87.6m. That means the supermarket chain needs to shed 10 more outlets to satisfy the Office of Fair Trading, which ruled at the time of its Safeway acquisition that it must sell 52 Safeway stores that are too close to its own.

WM Morrison yesterday sold 10 Safeway stores to its larger rival Tesco with a book value of £87.6m. That means the supermarket chain needs to shed 10 more outlets to satisfy the Office of Fair Trading, which ruled at the time of its Safeway acquisition that it must sell 52 Safeway stores that are too close to its own.

It has already sold 14 stores to Waitrose, 14 to Sainsbury's, one to West Midlands Co-op and three to Asda. Analysts estimate total proceeds could top £500m.

At the same time, Morrisons may be allowed to keep its store in Bond Street, Leeds, after failing to attract offers, the OFT said yesterday. The lease on the outlet expires at the end of 2007 and will not be renewed, the landlord of the store has advised the company. The regulator has said it may allow Morrisons to sell the remaining Safeway outlets to non-food operators if it cannot meet its undisclosed deadline.

Morrisons and Tesco publish interim results today, with Tesco expected to have maintained its lead in the market with pre-tax profits forecast to be up as much as 17 per cent on last year.

Meanwhile, Morrisons is trying to make its acquisition of Safeway, which tripled its size, pay off. The task is not proving easy. In July, four months after the £3bn deal, the North England-based retailer had to issue its first profits warning. Sales suffered when Morrisons slashed product ranges in former Safeway stores, prompting customers to shop elsewhere.

"They've had teething problems with Safeway. Rumour has it things have improved,'' Paul Mumford, of Cavendish Asset Management, said. "Things are going to be a bit of a long haul.''

With the retailer having to turn 450 former Safeways into black-and-yellow Morrisons stores, investors will be eager to know how the conversions are going. The plan was to proceed at a rate of three per week, finishing 53 in time for the crucial Christmas period. The programme will continue until November 2006, meaning two years of weak Safeway sales.

Meanwhile, shareholders are demanding that Sir Ken Morrison, the 72-year-old executive chairman, set up a nominations committee to examine who will replace him. Morrisons shares closed down 2.25p at 200p.