Morrisons pushes ahead with store openings after closing 100

Morrisons is pushing ahead with an aggressive expansion of its convenience stores, less than a month after it shut 100 loss-making sites.

The supermarket opened 30 more Morrisons Daily stores in the last three months and plans to open hundreds more in the coming years.

This is despite the grocer saying in May that “significant” Labour tax hikes had forced it to shut 100 unprofitable Daily stores, in a move which was expected to cost hundreds of jobs.

Morrisons became the UK’s fifth-biggest supermarket last month after German discounter Lidl leapfrogged the grocer into fourth place. 

Announcing the closure of 100 of its convenience stores last month, the supermarket hit out at “significant cost increases resulting from government policy choices, which have made returning these stores to profitability even more difficult”.

But Morrisons said on Wednesday that it opened 30 new Daily stores in the second quarter of its financial year, totalling 52 so far this year, adding that it has “plans for hundreds more in the years ahead”.

The grocer said the 100 shuttered stores were part of the more-than 1,000 sites it acquired when it snapped up collapsed convenience chain McColl’s in 2022. Its newly-opened Daily sites are part of its franchise arm, it said.

The grocer announced a 2.2 per cent jump in sales in the last three months, marking its 14th consecutive quarter of like-for-like growth, as total sales climbed 1.7 per cent to £4bn.

But chief executive Rami Baitiéh struck a cautious tone, citing “highly competitive” trading conditions and a “challenging backdrop”. 

Food industry leaders have warned that the effective closure to the Strait of Hormuz during the Iran war will spike food inflation, and the Morrisons boss said he is not getting his hopes up following the US-Iran peace deal.

“While more recent international news creates some grounds for optimism, we continue to monitor the impact of input inflation very closely and we remain committed to doing whatever we can to help keep prices down for customers,” he said. 

The grocer said that seasonal events like Valentine’s Day, Mother’s Day and Easter have driven its performance so far this year. Morrisons is poised to make the most of the World Cup and Father’s Day, it said.

The supermarket has faced steep debt costs following its £7bn takeover by private equity firm Clayton Dubilier & Rice (CD&R) in 2021 and is eyeing up plans to sell off £1bn worth of its property portfolio in its bid to pay this off.

Morrisons says its £3.1bn debt pile has been cut by 46 per cent since chief executive Rami Baitiéh joined the grocer in 2023 and kicked off a drastic turnaround plan.

The grocer said on Wednesday that it made £48m savings in the last quarter, taking its total cost-cuttings to £942m, just shy of its £1bn target.

The supermarket operates a “vertically integrated” model, by which it owns its manufacturing assets. 

Morrisons claims this model sets it apart with discount chains and major supermarkets, but analysts have questioned whether its cost is paying off.

Orwa Mohamad, a consumer analyst at Third Bridge, said: “Morrisons’ vertically integrated supply chain is becoming a challenge. 

“Owning manufacturing assets gives the retailer more control over meat, fish and fresh produce, but it also means cost inflation hits earlier than at rivals such as Tesco and Sainsbury’s.”