‘Happy days are here again’ as Mor­risons gets pro­moted

Yorkshire Post - Business - - BUSINESS -

STAFF AT Mor­risons will be com­ing in to work to­day with a spring in their step hav­ing heard that the re­tailer has re­joined the FTSE 100 in­dex of lead­ing shares.

This fol­lows a sharp jump in its share price on the news it has signed a lu­cra­tive deal with in­ter­net gi­ant Ama­zon.

The Brad­ford-based gro­cer will of­fi­cially re­gain its place among Bri­tain’s top 100 com­pa­nies later this month. A pro­mo­tion to the FTSE 100 will be a shot in the arm for CEO David Potts and his new team, who are work­ing hard to rec­tify the mis­takes of the pre­vi­ous man­age­ment.

Mor­risons was kicked out of the FTSE 100 in­dex at the end of last year fol­low­ing a sharp drop in its share price amid fall­ing sales, prof­its and mar­ket share.

Mor­risons’ shares fell by more than a quar­ter last year af­ter hit­ting a high of 208p in March shortly af­ter the ap­point­ment of Mr Potts.

How­ever, they have re­cov­ered on the news that it had a pos­i­tive Christ­mas and this week they shot up nine per cent on the news of the Ama­zon tie-up. They closed on Wed­nes­day at 205p.

The de­mo­tion last year ended 14 years in the top flight and was a bit­ter blow for the firm. As one in­sider said on the news of the pro­mo­tion: “Happy days are here again”.

The big su­per­mar­ket play­ers have been quak­ing at the thought of Ama­zon steal­ing their cus­tomers by launch­ing a ver­sion of its US Ama­zon Fresh ser­vice in the UK, but the on­line re­tailer has se­lected Mor­risons as its part­ner in­stead.

The deal is ex­pected to in­tro­duce wealthy Ama­zon Prime cus­tomers to Mor­risons’ cut-price fresh and frozen food of­fer­ing.

Mor­risons made a late en­trance to on­line and only has around three per cent of the UK on­line gro­cery mar­ket so it is big­ger ri­vals Tesco, Sains­bury’s and Asda that are ex­pected to be hit by Ama­zon’s en­try into fresh food.

Mor­risons has also an­nounced plans to ex­tend its own on­line gro­cery de­liv­er­ies to the whole of the UK un­der a new agree­ment with Ocado. It will take space in a new Ocado Lon­don ware­house, which will en­able Mor­risons to de­liver south of the River Thames, where it doesn’t cur­rently op­er­ate.

Ocado will also pro­vide Mor­risons with soft­ware to ful­fil on­line or­ders from its own stores, al­low­ing Mor­risons to en­ter the Scot­tish and North East on­line mar­ket for the first time.

Mr Potts, a for­mer Tesco di­rec­tor, has made some canny de­ci­sions since he joined Mor­risons and th­ese new con­tracts with Ama­zon and Ocado are just what the com­pany needs.

But the real test will come next Thurs­day when Mor­risons re­ports its an­nual re­sults.

Arch ri­val Leeds-based Asda has ac­cused Mor­risons of buy­ing mar­ket share at Christ­mas with deep dis­counts. Asda par­tic­u­larly pointed to Mor­risons’ cheap booze deals over the fes­tive pe­riod.

We will find out next week ex­actly how much this has dented Mor­risons’ prof­its.

Asda’s mantra is profit is san­ity and sales are van­ity, ie, any­one can im­prove their sales if they give stuff away for free.

But isn’t this miss­ing the point? When Bri­tish Gas an­nounces yet an­other hike in prof­its, no-one says: “Oh that’s good, the share­hold­ers are get­ting a nice pay-back.”

The su­per­mar­ket sec­tor showed out­ra­geous ar­ro­gance with yo-yo pric­ing and BO­GOF of­fers that ripped off cus­tomers for years. Dur­ing that time their share­hold­ers made a very nice, fat profit and it wasn’t un­til Aldi and Lidl came on the scene that any­one started to cham­pion the cus­tomer.

So what if share­hold­ers suf­fer lower prof­its?

It’s about time the big su­per­mar­kets put their cus­tomers first. Asda shop­pers couldn’t give two hoots whether Asda is main­tain­ing its profit mar­gins.

They want low prices and if the big four can’t pro­vide them, they’ll de­camp to Aldi and Lidl. In fact they al­ready have.

Mor­risons is on the right path with its bid to slash prices and re­turn the North­ern re­tailer to the value roots that Sir Ken safe­guarded for decades.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.