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Monday, November 15, 1999 Published at 05:59 GMT

Business: The Company File

Somerfield slims down

Supermarket chain has been hit hard by toughening competition

UK supermarket group Somerfield has announced it is selling hundreds of stores in an attempt to regroup and bolster confidence.

The company's shares plummeted on Wednesday after it issued a profits warning.

Britain's fifth-biggest retailer ran into trouble after it bought Kwik Save in February last year.

[ image: Troubles have escalated since Somerfield bought Kwik Save]
Troubles have escalated since Somerfield bought Kwik Save
It has been badly hit by a new wave of aggressive price campaigns by the market leader, Tesco, and by Asda, which is owned by US discount giant Wal-Mart.

Somerfield has now announced that 350 Kwik Save stores it had already said did not fit into its restructuring plans will be offered for sale as a going concern.

Another 100 to 140 larger Somerfield outlets will also be sold off as they no longer form a part of the company's future plans.

The BBC's Simon Gompertz reports: "Sales have been plummeting, precipitating a crisis"

It is also to speed up an overhaul of 400 Kwik Save stores it has selected as suitable for conversion to the Somerfield brand. So far since the takeover, only 70 stores have been converted.

The company says it aims to concentrate on the small to medium supermarket niche.

It has decided it cannot survive in a fight with the big out-of-town supermarket chains, so it wants to focus on convenient local retailing.

Big changes

The axe has also fallen at board level. Somerfield's chairman, Andrew Thomas, has retired with immediate effect.

The post is being filled by non-executive director Louise Patten until a permanent replacement is found.

Somerfield said its like-for-like sales in the 28 weeks to 6 November were down 6.3%.

At Somerfield branded stores, sales were down 1.4% while at Kwik Save sales were down 16.2%.

The company said its new strategy would result in a "smaller, leaner, fitter business aimed at increasing shareholder value which will be able to compete strongly in today's aggressive food retailing environment.

"The proposed share buy-back which shareholders approved at the Annual General Meeting will not proceed for the time being."

Somerfield is due to publish half-year results in January.

Its shares - which have lost about 77% of their value in the past year - fell another 10 pence during the day to 84p.

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