UK's Morrison to Keep Smaller Safeway Stores

LONDON - British grocer William Morrison Plc said on Monday it would rebrand smaller Safeway supermarkets as Safeway Compact, Reuters reports.

Earlier reports had speculated that Morrison, which had no stores smaller than 15,000 square feet before the takeover, would get rid of the Safeway name entirely and/or sell some of its smaller outlets.

Morrison's $5.6 billion takeover of Safeway Plc, which became effective today, boosts its store count to 554, and shifts the chain to fourth place behind market leader Tesco Plc, Wal-Mart's Asda and J Sainsbury Plc. The takeover was cleared on the basis Morrison would sell 52 Safeway stores.

Morrison also announced immediate price cuts on more than 300 basic goods such as milk, sugar and bananas at Safeway stores larger than 15,000 square feet. The smaller stores were not included in the discounts.

Managing director Bob Stott said a key goal was to raise the average customer spend in Safeway stores from 16 pounds ($30) toward the 25 pounds typically spent in Morrison, according to Reuters.

Of the Safeway stores it is keeping, Ken Morrison said five would be rebranded as Morrison by the end of May and it hoped to be converting around three stores per week from August.

Observers expect price competition in the U.K. market to intensify, given Morrison's new market clout.
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