Waitrose buys 19 Morrison stores

The department store group John Lewis yesterday announced a major expansion of its upscale supermarket chain Waitrose with the purchase of 19 stores from Wm Morrison.

The department store group John Lewis yesterday announced a major expansion of its upscale supermarket chain Waitrose with the purchase of 19 stores from Wm Morrison.

Fourteen of the stores are ones which Morrison was required to sell in return for being given the go-ahead to buy Safeway. In total Morrison must dispose of 52 stores. The ones being bought by Waitrose are the first batch to be sold off.

Morrison declined to say how much the sale had raised, but estimates put the proceeds at £200m to £250m. The 19 stores had a book value of £158m. Eighteen are Safeway stores and one is a Morrison's.

The purchase of the stores will take Waitrose out of its heartland in London and the home counties for the first time. The bulk of the stores are in the north of England and in Wales where Waitrose has little or no presence.

John Lewis operates 144 supermarkets under the Waitrose brand so the deal with Morrison will increase the size of its groceries business by more than 10 per cent.

Waitrose's managing director, Steven Esom, said it would take until Christmas to convert the stores from the Safeway format. Waitrose expects to raise sales per square foot from £14 under the Safeway brand to between £18 and £20.

The sale of the 52 stores is expected to net Morrison at least £600m. Analysts said it had always been keen to dispose of as many as possible to Waitrose, which is much less of a competitor than the market leaders Tesco and Asda. The Safeway takeover has made Morrison Britain's fourth biggest supermarket chain, snapping at the heels of J Sainsbury.

Morrison recently reported a 13 per cent rise in full-year pre-tax profits to £320m, despite absorbing £10.9m of costs related to the takeover.