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Retail Viewpoint – Morrisons

Third year in a row of l-f-l growth for Morrisons.

The retailer ended its 2017/18 financial year on a high with revenue excluding fuel up 4.4% to £13.5bn and a ninth consecutive quarter of positive like-for-like growth. While Aldi and Lidl continue to take share, Morrisons is at least holding its own with its Big Four rivals, highlighting the success of David Potts’ ‘Fix, Rebuild and Grow’ turnaround strategy, though Morrisons performance in 2014 and 2015 was so bad that growing from such bad comparables in an inflationary environment should be expected. Back then, Morrisons’ performance was so poor that activist investment funds circled, enticed by the idea of spinning off its property portfolio.

Morrisons under Potts is a much more attractive business, with a more coherent strategy in the two key growth areas in UK supermarket retailing, convenience and online. Morrisons’ wholesale business performed well during the period, boosted by the rollout of the ‘Morrisons at Amazon’ service to additional postcodes in London and Hertfordshire as well as Leeds, Birmingham and Manchester, and the ramp up of supply to McColl’s stores across the UK from January 2018. The new agreement to supply Sandpiper Cl will allow Morrisons to continue growing its wholesale business; and its wholesale partnerships allow it to capitalise on growth in the convenience market without the costs and risks it incurred with the disastrous M-Local folly that Potts’ predecessor embarked on.

While inflation has led to cost pressures, Morrisons is better placed than its rivals to deal with this, benefiting from its vertically-integrated supply chain and the high proportion of British-sourced products it stocks, which enabled it to keep the price of a basket of key items at Christmas the same as in 2016.

Source: GlobalData 14 March 2018

March 2018

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