The great Morrisons turnaround
More staff, better food and a profits bonanza . . .
A SALES and profits bonanza at Morrisons has been hailed as one of the greatest high street turnarounds following a fouryear slump.
The supermarket chain saw profits jump an incredible 39.9pc to £200m in the half-year to July while sales across stores open for more than a year soared 3pc higher – an impressive feat for a retailer.
It’s the seventh consecutive quarter of growing sales Morrisons has boasted since David Potts was appointed chief executive.
His transformation plan brought an end to a four-year slump as the chain suffered from the arrival of German rivals Aldi and Lidl. Morrisons had been one of the biggest losers as shoppers left for the low- cost upstarts.
But by slashing prices, hiring thousands of workers to help customers, and calling time on underperforming stores, Potts, 60, has led a revival.
In his latest attempt to boost the supermarket, Morrisons has struck a deal with McColl’s to supply the convenience store chain with Safeway products.
The partnership will see Safeway and branded products in 1,300 convenience shops and 350 newsagents, starting from January next year.
Morrisons said the move will also secure wholesale sales of £700m, including tobacco, by the end of next year, with the amount rising to £1bn.
As a result of the deal it has increased its profit guidance for the full-year.
Other changes under Potts have seen the grocer add hand car washes at its stores, improve its own-label range and expand its ‘Best’ range, due to hit 1,000 products by the end of the year.
The retailer has also cut the cost of 2,607 products in the first half of the year under its price crunch initiative.
Analysts were impressed. John Ibbotson, director of retail consultancy Retail Vision, said: ‘Morrisons has quite simply been transformed over the past two years. Given the cut-throat market we’re in, this has been one of the great retail turnarounds. Dave Potts has kept his strategy simple and, in the grocery world, simple is generally best. By re-energising its food proposition and in putting customers first, Morrisons has regained their trust.
‘This is another warning shot to the discounters, Aldi and Lidl.
‘Crucially, Potts understands that Morrisons cannot now rest on its laurels but needs to build on the momentum it has achieved. Staying still is a dangerous game for today’s supermarkets, however established, and however deep their pockets.’
Potts, a father of two, has spent his entire career in grocery. He first had a summer job at Tesco while studying for his O-levels. He failed all five of them.
He went on to retake his Maths and English qualifications and joined Tesco full-time.
He became the chain’s youngest store manager at the age of 24, and continued to work his way through the ranks.
The grocery industry has been consolidating in recent months, in order to see off the threat which has been posed by discounters Aldi and Lidl, and by Amazon, which sealed its £10.7bn deal to buy healthy retailer Whole Foods last month.
Tesco is currently hoping to finalise a £3.7bn takeover of con- venience chain Booker by Christmas, while Sainsbury’s is rumoured to be pondering a takeover of Nisa.
But, unlike its rivals, Morrisons has shifted focus to bolstering its lucrative wholesale business.
Its twin deals with Ocado and Amazon means that is has a presence as a branded retailer and a wholesale supplier.
Despite the boost, shares at Morrisons were down 5.1pc, or 12.6p, to 232.4p. Some analysts were disappointed that sales had only risen 2.6pc in the second quarter after a rise of 3.4pc in the first. Others had hoped for a fullyear profit upgrade or hints of future special dividends.