Morrisons looks to online and convenience to boost profit
Chief executive Dalton Philips said the launch of the online food offer was “an important step” in differentiating its offer. He also admitted the supermarket was “a late entrant” to the online food market but claimed key lessons had been learned from its acquisition of the online toy retailer Kiddicare and Fresh Direct.
“We’ve been studying the market for two years,” he told BBC Radio 4’s Today progamme yesterday (March14). “It’s a market that is accelerating very quickly.”
Philips added that the firm would ensure its experience of fresh food retail, craft skills and vertically integrated model translate into “our online food offer”.
Discussions with Ocado
Morrisons is discussing the possibility of a partnership with online distribution firm Ocado. The supermarket stressed that its decision to launch an online offer was not dependent on its discussions with Ocado.
The retailer also pledged to double the number of its convenience stores nationwide. “We are increasing our target for store openings in the coming year by 40% and plan to have 100 stores trading by the end of the year,” said Philips.
Meanwhile, the retailer’s results for the 53 weeks to February 3 2013, revealed underlying profit before tax down by 4% to £901M.
Pre-tax profits
Pre-tax profits fell by 7.2% to £879M compared with the previous financial year.
Like-for-like sales – exluding fuel and VAT – were 2.1% down, compared with a rise of 1.8% for 2011/2012.
Net debt rose to £2,181M versus £1,471M in the previous financial year.
In a statement accompanying the results, Philips said: “The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been. We have implemented a range of measures to address this and are making good progress in improving our promotional effectiveness and in communicating our points of difference.”
But he added that its vertically integrated model had paid off during the horsemeat scandal. “Recent events have underlined why it's so important that we tell our customers how and why we're different and what our vertical integration really means for them. Food quality, provenance and the issue of trust are at the forefront of consumers' minds and these are all areas where Morrisons has something genuinely different to offer.”
Meanwhile, Morrions faces three particular challenges, according to City analyst Investec. Those include: its 'northern bias', the ageing population and its lack of a multi-channel offer.
