Morrisons announced the largest property writedown of the supermarket price war era on Thursday as its rivals prepare to slash the value of their store estates.
The supermarket’s loss for the year to 1 February ballooned to £792m from £176m in the prior year. The figure was primarily due to a £1.27bn writedown on the value of its property holdings.
The cut in the value of its store estate is down to the reduced price that Morrisons could raise if it sold its property assets. CFO Trevor Strain said the writedown reflected a “change in some forward-looking assumptions [and] a prudent assessment of market value”. The action comes on top of a £903m writedown last year, primarily property-related but also reflecting the reduced value of the now-sold Kiddicare brand.
The £1.3bn property impairment is the largest yet announced by one of the big four, with further writedowns expected from Tesco and Sainsbury’s over the coming weeks. For Tesco, analysts expect a £1bn to £2bn property impairment.
Tesco took an £804m property hit in 2013, while Sainsbury’s said in November it would write off £628m related to the reduced book value of existing stores and sites it will no longer build on.
Morrisons’ third-party property portfolio valuation dropped to £8.5bn during the year following property disposals worth £448m. The chain is pushing on with its three-year drive to achieve £1bn of property disposals announced last year.
However, Strain said it remained committed to a predominantly freehold property portfolio (currently still over 80%).
The retailer said underlying profits before tax fell 52% to £345m after pricing was reset last year. Like-for-like sales excluding fuel fell 5.9% while total turnover was down 4.9% to £16.8bn. It also said it planned to close 23 M Local c-stores.
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