Morrisons targets store closure programme

The sale to Asda is in line with Competition Commission orders. Four of the stores to be purchased by Asda are large former Safeway shops in the West Midlands and North West, while a fifth is still under negotiation.

The Competition Commission said it would allow Asda to buy just six former Safeways from Morrison's when it blocked the Wal-Mart chain from bidding for the full business.

However, it has been reported that Morrisons is now looking into the possibility of shutting down some of the 52 stores that it has been ordered to sell.

Morrisons has already applied to the Competition Commission to "retire" up to 12 outlets. Under commission rules, Morrison is entitled to close the stores, although the body must give approval on a store-by-store basis.

Morrisons has sold 14 of the original 52 to Sainsbury's and a further 14 to Waitrose, which also bought five stores that were not on the commission's list. The Co-op bought another. Meanwhile, Morrison's plans to sell 120 smaller stores of 15,000 sq ft or less have attracted interest across the food sector.

Yorkshire-based Morrisons, Britain's fourth largest supermarket group, said it had been surprised at the level of interest in the smaller Safeway stores (all of which are less than 15,000 square feet) from other retailers at the time of the takeover back in March, which prompted it to rethink its plans for the outlets.

All of Britain's leading High Street supermarket groups have been touted as likely bidders - chains such as Iceland, Waitrose, Co-op and Somerfield could all benefit from the opportunity to expand their businesses, especially with the larger groups such as Asda being limited on competition grounds.

Morrisons said at the outset that its goal was to turn around Safeway's flagging performance, but the latest data from TNS Superpanel shows that it still has a long way to go. Safeway's market share in the 12 weeks to 20 June dropped to 7.8 per cent from 9.1 per cent a year earlier, despite the roll out of lower prices by the company's new owner. Sales dropped by 10 per cent to £1.3 million.

In contrast, Morrisons' own sales rose by 15 per cent in the same period to 1.05 million, taking its market share to 6.3 per cent from 5.7 per cent. Combined, the group saw sales almost identical to those a year earlier at £2.37 million.

Morrisons remains the best-performing retailer, according to the TNS data, with only market leader Tesco coming close with an 11 per cent rise in sales to £4.7 million, lifting its market share to 27.9 per cent from 26.5 per cent. Asda's sales rose 8 per cent during the quarter, while Sainsbury's dropped by 1 per cent.