My Local: Collapse risks 1,700 jobs and possible liabilities for Morrisons

Convenience store chain My Local, which was sold by Morrisons last September for £25m, is on the verge of collapse after it filed a notice of intention to appoint administrators; this puts 1,700 jobs at risk and could result in a liability of up to £20m for Morrisons. My Local is believed to have suffered due to the poor location of its stores, many of which were former Blockbuster sites bought when the video rental chain went bankrupt. It has also been hit by the price war taking place in the grocery market, a sector that is reaching saturation. This marks the latest retailer to come under pressure following the collapse of BHS and Austin Reed.

Convenience store chain My Local is on the verge of collapse after filing a notice of intention to appoint administrators, putting 1,700 jobs at risk.

Accountancy firm KPMG, which has been working with My Local’s management on considering options for the future of the 120-store chain, was lined up on Tuesday afternoon to handle an administration. It is currently not certain whether or not the administrators will be appointed. The notice provides protection from creditors for 10 days before the company potentially tips into administration.

Any appointment could mean a possible liability of up to £20m for Morrisons, which sold the convenience store chain to a group fronted by the retail veteran Mike Greene, who appeared on Channel 4 show The Secret Millionaire, for £25m in September 2015.

Greene’s book, Failure Breeds Success, tells how he went bankrupt aged 27 before moving on to work in the retail sector and creating a retail consultancy called him!The My Local deal was backed by Greybull Capital, which was a co-investor, along with OpCapita, in Comet, the electrical retailer that collapsed in controversial circumstances in 2012.

As part of the sale of its convenience stores, Morrisons retained a guarantee on a number of lease obligations, meaning that they will revert to the supermarket if My Local collapses. At the time of the sale, the leases on the stores were thought to have an average of about five years remaining.

Morrisons sold 140 My Local stores, at which about 2,300 people were employed, but it is understood that 25 have already closed or been sold on, and about 600 jobs have gone as the chain has downsized amid disappointing sales.

KPMG has looked at a number of options for the business, including the sale of up to 10 stores to the Co-operative Group.

Joanne McGuinness, a national officer for the Usdaw union, said: “My Local staff are devastated by the news that the company is going into administration. Having been sold by Morrisons last year, there was a mood of optimism that the new owners could turn around the business.

“We are talking to the company in a bid to save jobs and get the best deal for staff. In the meantime, Usdaw is providing the support, advice and representation they need at this unsettling time.”

The chain is understood to have suffered because of the poor location of its stores, many of which were former Blockbuster sites bought when the video rental chain went bankrupt.

The grocery market is in the middle of a price war prompted by the rise of discounters Aldi and Lidl, which have been rapidly opening stores and winning over more customers.

According to retail analysts The Local Data Company, the convenience store market is reaching saturation, with the number of such shops declining last year in 288 towns in the UK. That comes as the total number of convenience stores increased by 21% from 13,617 in 2010 to 16,426 at the end of 2015.

My Local is the latest retailer to come under pressure following the collapse of BHS and Austin Reed, both of which called in administrators in April. Brantano went into administration in January, but the majority of jobs were saved after the footwear chain was bought back by its owner Alteri a month later.

Meanwhile, clothing chain Blue Inc, which includes the Officers Club menswear chain, also went into pre-pack administration at the start of this year with a plan to close more than 60 of its 240 stores, threatening 500 jobs.

Greybull and My Local were unavailable for comment.