Morrisons is pressing ahead with a bold expansion plan for its convenience store arm, Morrisons Daily, despite closing 100 loss-making sites just last month. The £3.1bn debt-ridden supermarket aims to open hundreds of new outlets in the coming years, building on recent successes that have seen it report a robust 2.2% increase in sales over the last three months.
The second quarter results show Morrisons successfully opening 30 new Daily stores, taking total new openings this year to 52. This expansion is part of its franchise model, contrasting with the 100 shuttered sites acquired through the purchase of the collapsed McColl’s chain in 2022. CEO Rami Baitiéh has previously warned that 'significant' cost increases, including potential Labour tax hikes, had made it difficult to return these original stores to profitability.
However, despite strategic closures, Morrisons reported a 1.7% increase in total sales to £4bn, marking the 14th consecutive quarter of like-for-like growth for the grocer. Baitiéh maintained a cautious outlook, highlighting the 'highly competitive' trading environment and a 'challenging backdrop' for the industry.
The supermarket's debt reduction efforts remain a key focus, with the £3.1bn pile having been reduced by 46% since Baitiéh initiated a turnaround plan in 2023. This includes £48m in savings achieved in the last quarter, bringing total cost reductions to £942m, nearing its £1bn target.
Morrisons' 'vertically integrated' business model, which sets it apart from competitors like Tesco and Sainsbury's, has come under scrutiny for its potential cost-effectiveness. Analysts have raised questions about whether this model will shield the company from cost inflation, given its earlier exposure to rising costs.
The supermarket's expansion plans are taking place against a backdrop where Morrisons recently became the UK’s fifth-largest supermarket, having been overtaken by German discounter Lidl. The performance of seasonal events has positively influenced sales, with Morrisons now seeking to capitalise on this momentum.