The supermarket has agreed to sell 140 stores to a team led by retail consultant Mike Greene and backed by turnaround specialist Greybull Capital. Read about plans for the new business here.
The Bradford-based retailer expected to suffer a £30M loss on disposal and will retain liability due to a guarantee on lease obligations.
Only five M Local stores will be kept and turned into small Morrisons supermarkets.
Morrisons ceo David Potts, who was appointed in February, admitted defeat in the convenience sector for now but did not rule out re-entering the market.
M Local at a glance
- Agreed sale of 140 stores for £25M in cash
- Buyer announced as team led by Mike Greene and backed Greybull Capital
- Expected loss of £30M on disposal
‘Learnt from much from its entry’
“Convenience is a large and growing channel in UK food retailing. Morrisons learnt much from its entry into the market, but M local was unable to scale,” Potts said.
“However, we remain open to other opportunities in convenience in the future. I would like to thank all the Morrisons colleagues for their hard work and dedication to M local.”
The M Local business would have required significant investment in new sites, additional capital expenditure and lease commitments, to become profitable, according to a review by Morrisons.
Focus on core supermarkets
The retailer believed that the sale will allow investment to be focused on core supermarkets instead.
Greene, former Association of Convenience Stores chairman, has extensive experience in the convenience sector and appeared on reality TV show The Secret Millionaire.
Morrisons will remain liable for leases after the sale and stores could revert to Morrisons if the new business fails. This liability is estimated at up to £20M.
The stores earmarked for sale recorded an operating loss of £36M in 2014/15 and the budgeted operating loss was £23M for 2015/16. Gross assets were £68M in the last financial year.
The retailer is due to report its interim results on Thursday, September 10.
Verdict from Morrisons
"Morrisons learnt much from its entry into the market, but M local was unable to scale.”
- David Potts, ceo at Morrisons