The Bradford-based chain would remain on the hook for leases even after selling about 160 stores because there is a parent company guarantee on its retail agreements, The Guardian reported.
This guarantee means that Morrisons would retain a liability and must pay outstanding rent if the new owner closed any convenience stores, the newspaper said.
As a result it is said that the retailer would have to book a write-down, which is the reduction of the book value of assets.
Mike Greene behind bid?
Turnaound specialist Greybull Capital, which rescued Monarch Airlines last year, is tipped to be leading a group of retail specialists bidding to buy the M local stores.
Retail consultant Mike Greene, former Association of Convenience Stores (ACS) chairman, is reportedly spearheading this takeover bid.
Shore Capital verdict
“Morrisons CVS [convenience store] business has not been a solution to a strategic problem to our minds, with the probability that many stores are loss-making."
- Clive Black and Darren Shirley, analysts at Shore Capital
Greene, who has extensive experience in the convenience sector, was a millionaire by the age of 38, despite growing up in poverty and leaving school at the age of 16.
In an episode of reality TV show The Secret Millionaire, the businessman went back to his home town of Peterborough to help change young lives there.
Greybull Capital and Morrisons declined to comment.
‘Poorly acquired and inferior sites’
Meanwhile, Shore Capital analysts Clive Black and Darren Shirley warned the supermarket's convenience business had “reached its zenith”.
“Morrisons CVS [convenience store] business has not been a solution to a strategic problem to our minds, with the probability that many stores are loss-making and lacking soothing current sales and contribution trajectories,” said Black and Shirley.
The analysts said Morrisons had to contend with “poorly acquired and inferior sites”, which led the retailer to ditch the worst 23 outlets, cutting 300 jobs, five months ago.
Morrisons arrived late to the convenience store market after Tesco Express, Sainsbury’s Local and the Co-op had already taken many of the prime sites.
In March five top executives, including property and strategy director Gordon Mowat and convenience managing director Nigel Robertson, quit the company.
But Miles Foster, who leads the M local chain, survived the management shake-up which took place shortly after the appointment of CEO David Potts.
The retailer is due to report its interim results on Thursday, September 10.
M local stores at a glance
- Morrisons opened its first convenience stores in 2011
- In March the supermarket revealed plans to close 23 outlets, with the loss of 300 jobs
- The supermarket is reportedly in talks over the sale of about 160 stores
- Morrisons' website said M local stores employ about 20 workers each