Morrison launches Safeway makeover

MORRISON Supermarkets promised to slash Safeway prices by 5%-6% by the autumn to bring them in line with its own supermarkets.

The retailer, which completed the takeover last week, has reduced prices on 800 goods and identified 300 job cuts at Safeway's headquarters in Hayes, west London.

It needs to act quickly to stem the decline at Safeway, which showed a 4% fall in underlying sales last week, compared to a rise of nearly 10% at Morrison.

Chairman Sir Ken Morrison has installed 40 of his own staff in Hayes, to supervise the Safeway integration. He reckons 1,200 out of 1,800 HQ jobs will eventually go, with all operations transferring to Bradford within 18 months. 'We are making good progress,' said Sir Ken.

Morrison shares rose 3 1/2p to 256 3/4p as pre-tax profits for the year to February rose 13% to a record £320m. This included £10.9m of bid costs and adviser fees, on top of the £3.5m spent on fees last year. Morrison also has to pay for all of Safeway's bid costs - estimated to top £50m.

Total sales rose 15% to £4.9bn, while dividends climbed from 2.7p to 3.25p.

The shares trade on nearly 20 times forward earnings, but deserve their rating.

The supermarkets chain is 'close' to finalising the sale of a chunk of the 52 Safeway stores that it must sell. Waitrose is tipped as the buyer.

Morrison is 'intrigued by the amount of unsolicited interest' in its 136 smaller stores. Morrison plans to rebrand them as 'Safeway Compact' and charge higher prices than in the standard Morrison stores.

'We don't want to bastardise the Morrison pricing structure,' said Sir Ken.

Somerfield acquired Scottish convenience store chain Aberness from owners Thomas Cochrane and Stanley Morrice. Aberness owns 36 Mace stores and distributes to a further 130 shops. It made profits of £172,000 on sales of £65.9m last year. The takeover price was not disclosed.