NEWS

Is Morrisons set to benefit from the Sainsbury’s Asda merger?

Published on: 13th September 2018

The £14b merger of J Sainsbury and Asda will see both forced to offload stores to secure a deal.

It is understood that Morrisons, the fourth-largest supermarket in the UK, is eyeing shops that Sainsbury’s and Asda could be forced to sell as part of a probe into the tie-up.

Sainsbury’s chief executive Mike Coupe has already admitted that of Sainsbury’s 644 supermarkets in the UK, 138 are within a mile of an Asda store, raising potential competition issues once they are owned by the same company. In 10 locations the two firms are less than 200 yards apart.

Mike has played down the threat to these stores, saying rivals are nearby, meaning competition remains fierce. But it is thought a number could be sold, with some reports estimating that between 250 and 300 stores may need to go.

Morrisons has a 10.4% share of the grocery market, compared with Tesco, the leader, which claims a 27.4% slice.

If the Competition and Markets Authority lets Sainsbury’s and Asda join forces, they will have more than 30% of the market.

The news comes as Morrisons posts its latest results, indicating that the revival of the store continues apace.

The supermarket’s sales soared in the first half of the year, but profits slid almost a third to £142m. Like-for-like sales, excluding fuel and VAT, rose 4.9% for the six months to 4th August – better than the 3% increase for the same period last year – while second quarter sales were up 6.3%; its best result for almost a decade.

Chief executive David Potts said Morrisons continued to become broader, stronger and more popular. The retailer said it had extended its Fresh Look programme to more than half its 500 stores, with significant improvements in product range and customer service, and developed its offers for online, wholesale, local and in-store services.

Sales have now risen for the past 11 consecutive quarters and its online delivery service is available to more than three quarters of UK homes, including more parts of southern England and Scotland for the first time.

Profits were hit by £51m of financial costs including £33m for a bond tender offer. The underlying pre-tax figure was 9% higher at £193m.

Shares in Morrisons have gained pace this year but fell 2.4% to 259p on Thursday, valuing the retailer at just over £6b.

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