BUCKLING under the pressure of the supermarket price war, Somerfield is selling 45 of some of its best stores for #305m to various competitors.
At the same time it has revealed that its half-time pre-tax profits slumped 44% to #63.9m as it lost both market share and actual sales and found itself overstocked.
Turnover fell 7% to #2.98bn with a savage like-for-like deterioration of 13.7% in those trading under the Kwik Save fascia as shoppers deserted them in droves.
Somerfield's 1998 merger with the 850-strong Kwik Save led to ''acute problems'' in the supply chain in the latter part of last year as the group fought to rationalise the Somerfield and Kwik Save distribution systems.
However, the City was happy with the disposals as the figures were much as already indicated by the company and the shares rose 11p to 75.5p, although that contrasts with the 460.5p seen
last year before chief executive David Simons issued the first of three profit warnings.
The CWS is acquiring 11 out of the first batch of 19 units stores for #90m with the Manchester- based organisation saying that it was very happy with the price.
It will expand its market town portfolio and bring in Scottish stores of between 10,000 sq ft and 19,000 sq ft selling space in Helensburgh, Balloch, Peterhead, Leven, Polmont, Glenrothes, Fraserburgh and Alloa with completion in mid-March with all the Somerfield staff moving over.
As expected, Somerfield has cut its dividend with the interim ''re-based'' from 4.5p to 1.5p.
Last year, it paid a total of
13.2p and a reduction to 5p henceforth is probable.
Somerfield has decided to retain 57 of its larger stores, which brought in sales totalling #540m and operating profits of #64m, because they did not receive good enough offers from the bevy of circling competitors. They included Asda, Lidl, J Sainsbury, Tesco, Waitrose and William Morrison, as well as a handful of
individual co-operative societies in England.
It hopes to sell 350 Kwik
Save stores in perhaps a
couple of months time as these are difficult to switch over
to the much more successful and attractive Somerfield format.
Even there, in the 28 weeks to November 6, the core Somerfield saw flat like-for-like turnover and that only after additional sales boosted by 1.8% due to heavy discounting.
Since then, there has been little improvement with the group seeing an overall 8.4% setback compared with 6.3% in the earlier period.
Simons aims to reverse the trend by increasing the fresh food content and also promoting local suppliers for specific product lines.
The remaining 400 Kwik Saves are seen as a major driver of profits for the future once they are converted, while the group is also beginning to develop its Internet shopping capability.
Philip Dorgan at WestLB Panmure conceded that Simons had received a good price for the disposals but the big question is what happens to the Kwik Save units.
He added that it would cost a huge amount to close them down.
Dorgan now reckons it is impossible to forecast profits for the full year given both the reduction in the store portfolio and the continuing downward trend in sales and he remains a seller of the stock.
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