Morrisons 'to sell off 120 stores'

Supermarket chain WM Morrison is to sell up to 120 of its smaller stores in a £250 million deal with rival group Somerfield, it was reported today.

Morrisons picked up the outlets in March's £3 billion acquisition of Safeway but has deemed them too small to fit in with its strategy.

The deal with Somerfield could be announced on Thursday, when Bradford-based Morrisons is also due to unveil half-year profits of around £125 million.

Expectations for the interim figures have already been revised down by analysts after July's warning from chairman Sir Ken Morrison that profits would be affected by "short-term" problems integrating the Safeway estate.

Progress at stores converted to the Morrisons format has been strong but that has so far failed to cover the difficulties at Safeway-branded sites.

In this week's update City analysts will be looking for signs that price cuts at Safeway stores have started to deliver an uplift in sales volumes.

The disposal of the smaller stores - many of which are in Scotland and the north of England - should simplify the task facing Morrisons in overhauling the portfolio of 427 Safeway sites it picked up earlier this year.

As part of a separate sale process, Morrisons has sold the bulk of the 52 outlets it was required to offload by competition authorities. Waitrose and Sainsbury's have been among the beneficiaries of that process.

The move by Somerfield comes as the Bristol-based chain continues to build up its presence in the convenience store sector, following a deal earlier in the year to buy Scottish chain Aberness.

It is also in the middle of a refit programme involving more than 1,200 shops under its Somerfield and Kwik Save brands. The Observer said it was likely the group would use a sale-and-leaseback to fund the acquisition.