Shopping Newbiggin North Yorkshire

The Co-Op on Gosforth High Street

The Co-operative group plans to sell 19 stores in the North East to a rival firm as part of a strategy to revamp its retail presence around the country.

The mutual said the £117m deal will see 298 smaller food stores snapped up by McColl’s Retail Group, with money from the sale used to buy 100 new stores this year and 100 more stores in 2017.

Among the stores to be sold are one on Gosforth High Street in Newcastle, along with shops in Whitley Bay, South Shields and Blyth. Outlets in Newbiggin, Stakeford and the Allerdene area of Gateshead are also on the list.

Seven stores in County Durham will be sold, with McColl’s to take over the shops at Bear Park, Stanley, Darlington, Spennymoor, Chilton and Newton Aycliffe. It will also be buying six on Teesside: three in Hartlepool, plus shops in Thornaby, Brotton and Loftus.

The Co-op said it was selling the stores, which are 1, 700 sq ft on average, because they are too small to stock all of its own-brand products which have been key to driving up sales.

The mutual said like-for-like sales growth in its convenience estate hit 4% in the year to April, while like-for-sales across its food stores in the 52 weeks to January 2 rose by 1.6%.

McColl’s said the cash deal for the stores would be part funded by raising around £13.1m from placing 10.5m shares to new and existing investors.

Jonathan Miller, chief executive of McColl’s, said the acquisition of the new stores would “substantially” accelerate its growth strategy.

He added: “These stores are profitable, well invested, and the perfect size for our operating model. We expect the transaction to be significantly earnings enhancing for our shareholders.”

The move will see 3, 808 Co-op staff transferred to McColl’s as part of a TUPE agreement.

Steve Murrells, chief executive of Co-op Food, said: “The Co-op Food business continues to move forward with a clear momentum and purpose to deliver a compelling and convenient shopping experience for our millions of customers and members.

“Today’s announcement is completely in line with our strategy, as these stores did not allow us to provide a sufficiently compelling own-brand offer for our members going forwards. The proceeds will be re-invested to drive sustainable growth for our members and I’m delighted that all 3, 808 colleagues will transfer to McColl’s on the same terms and conditions.