Morrisons may sell its free hold property

Morrisons (UK Supermarket chain) may sell its freehold property to release cash to the business. I must say I don’t get this, sell off something you need to rent/lease back! OK selling off something you no longer need, but to rent it back, surely you know that whoever is renting it back is going to want to make a profit .. and that means you are going to pay more. 

1. If it’s such a good idea why are not millions of home owners doing the same, selling off their property to rent back? 

A1. Equity release only makes sense if you are planning to die.

A2. Over time the rent/lease costs will go up and eventually you will pay more.

A3. If your income drops you have a financial millstone which you have to feed. If you stop/can’t feed it you have to shut operations, which cuts income further and you get caught in a financial spiral.

2. Do we not remember the care home Southern Cross. Some financial wag thought it would be a good idea to sell off 752 of its care homes and lease them back. The leases went up, they couldn’t pay the rent and this new financial burden (which wasn't there when they owned them) put them out of business (see A2 and A3 above). What Southern Cross failed to realise was that they were a prosperity business providing a service and not a service business that happened to own property. 

Now Morrisons is clearly a supermarket chain, no question. However would it sell of its shelves and lease them back? What about its cold storage, farms etc?  You could boil it down and say a supermarket is simply a logistics company that gets items on a shelf just in time for the consumer to pick them up and put them in their trolley. That is Amazon (well almost) isn’t it? Is that what people want? 

Look at the move to online ordering and home delivery then maybe the long term outlook is simply logistics. But whenever I go to the supermarket they seem pretty busy places, so the physical location is important too. Changing human habits is a lengthy process. Plus the "pickers" don't pick the best, don't make the right substitute etc. So some things to sort out. 

Morrisons have been late to the home shopping market but they don’t need to throw away what they have to make up the gap. They were the only supermarket that new that their beef hadn’t previously run in the 6:30 had Haydock and they didn't make enough of that.  They control/own their food chain, (from farm to slaughter house) who new?  What other fake food is out there? Even without specifics Morissons could become the champions of the consumer and put a burden on their competitors that Morissons have already got covered. 

What Morrisons need is to step up its home shopping a bit, and employ an aggressive marketing agent, not panic and sell off its stores. If Morrisons do sell off their property, then ride the wave as the money acts like a kind of morphine, but remember to get out of any shares as it wears off and A1 kicks in.