Morrisons is to shut 132 unprofitable McColl’s stores putting 1,300 jobs at risk, months after winning the bidding war to buy the struggling convenience store chain.
The UK’s fifth-biggest supermarket chain, which beat the owners of Asda to buy the retailer’s 1,164 stores and newsagents after it went into administration earlier this year, said that despite the cuts it believed the business had “strong potential”.
McColls, which was started by the Scottish footballer Robert Smyth McColl in 1901 with a single shop in Glasgow, now has stores across Great Britain.
“We very much regret the proposed closure of 132 loss-making stores but it is, very sadly, an important step towards the regeneration of the business,” said Joseph Sutton, Morrisons’ convenience, online and wholesale director. “We have a great deal of work to do but there’s no question that McColl’s is a business with strong potential.”
The closures come after Morrisons, which lost its spot as the UK’s fourth-largest grocer in September when it was overtaken by Aldi, revealed its profits had dived 50% this summer as it battled “unprecedented inflationary pressures” at its in-house food processing arm.
Supermarkets are facing higher prices from grocery suppliers and increased labour and energy costs just as shoppers rein in spending on non-essentials as they deal with soaring inflation on electricity and gas bills, mortgages, rent and food.
Convenience stores also face competition from delivery services such as Deliveroo, JustEat and Getir, which rapidly expanded during the pandemic. The UK’s biggest grocer, Tesco, is also expanding, adding three new checkout-free stores this week in London and Birmingham.
Morrisons is thought to be under additional pressure from soaring borrowing costs after debts soared from £3.2bn in January 2021 to £6.8bn a year later in order to finance last year’s takeover deal by US private equity firm Clayton, Dubilier & Rice.
The company said that it would delay the closure of 55 of the McColl’s stores that house Post Office counters until next year to “enable them to serve their communities through Christmas and to allow the Post Office additional time to make alternative arrangements”.
Morrisons also said that all affected staff members would be offered alternative employment at a nearby McColl’s or Morrisons store, or one of its logistics operations or foodmaking centres.
“We are now able to begin the urgent journey to transform McColl’s into a viable, well-invested and growing operation,” said David Potts, chief executive of Morrisons.
Last month, the UK competition regulator paved the way for the clearance of Morrisons £190m rescue deal on the condition it sold 28 McColl’s stores in 35 areas where the two retailers compete. All 16,000 McColl’s staff were transferred to Morrisons as part of the deal.
Morrisons’ new parent CD&R is also the parent company of Motor Fuel Group, which operates more than 800 convenience stores, the vast majority of which are part of its petrol stations.
The supermarket chain says that it has plans to convert 1,000 McColl’s stores to its Morrisons Daily format within two years, a rebranding exercise it says boosts sales by a fifth, based on the 286 stores it has already rebadged .
