Supermarket group Morrisons to buy 49 Blockbuster stores

Blockbuster

UK supermarket group Morrisons (LSE:MRW) announced today a big step in its expansion into the convenience stores sector.

The company revealed that it has agreed to purchase 49 Blockbuster stores from Deloitte, the administrator for the troubled DVD rental chain.

According to Morrisons, this marks the start of an accelerated expansion of the supermarket’s “Morrisons M local” convenience store franchise, previously known simply as “M local.” It follows the company’s purchase earlier in the year of seven stores formerly operated by photographic retailer Jessops.

Through the Blockbuster purchase Morrisons gains quick access to a significant number of high street and neighbourhood locations across the country. Many of the shop locations are in South East England, where the chain has plans to establish a bespoke distribution network.

A BBC report said today that Morrisons has a UK market share of 11% among the supermarkets, but in the South its share of the market is just 6%.

Later this month Morrisons will open a 100,000 sq ft multi-temperature distribution centre in Feltham, West London, which will become the hub of its regional distribution network.

Morrisons intends to open at least 70 Morrisons M local stores by the end of 2013, with its initial focus in London and the South East. The former Blockbuster locations are planned to open as Morrisons convenience stores by the end of the summer.

In a statement this morning, Gordon Mowat, managing director of Morrisons Convenience, said that the smaller stores would prioritise fresh food. All Morrisons M locals will have over 100 lines of fresh fruit and vegetables as well as fresh meat, fish and bakery items.

Deloitte announced last week that it would be closing another 164 Blockbuster stores over the coming weeks as part of a phased closure. The outlets sold to Morrisons are among this group.

The remaining stores in the chain will remain open for the time being and will continue to trade as normal while the administrators continue negotiations with bidders.

Commenting on the deal with Morrisons, Deloitte partner Lee Manning said that the transaction represents a good deal for both the creditors of Blockbuster and Morrisons, adding that the administrators “are pleased that these stores have found an alternative user that can create new employment.”

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