Morrisons is thriving – as Sir Ken’s old values keep paying dividends
WHEN all this is over – and that time will come – people will look back and remember which companies looked after their customers, staff and investors, and which rode roughshod on those crucial stakeholders. The more considerate firms should benefit from greater demand for their wares, a more committed workforce and, ultimately, stronger share price performance.
Morrisons is one such business. The supermarket has always been a little bit different from its peers. Rooted in Bradford, Morrisons has kept a touch of the family business about it, not least because it was run by the founder’s son for more than five decades.
The late Sir Ken Morrison took the helm in 1956 and retired in 2008. Known for his caution, he was credited with looking after customers and staff, while delivering steady returns to shareholders.
After he retired, the group went through a period of turmoil. Today, however, Morrisons has regained some of the qualities that set it apart during Sir Ken’s long tenure.
There is a focus on service and customer interaction, a desire to source produce from local suppliers and a determination to treat employees fairly. The group also prides itself on producing 25 per cent of everything sold in store, including meat, fish, bread and hundreds of deli items.
Morrisons even makes its own hand sanitiser. This was initially used only in the firm’s food manufacturing sites, to protect staff, but is now widely available in store.
This type of thinking has come to the fore during the coronavirus crisis. Most food retailers have been doing their best to keep the nation fed and watered, but Morrisons has done just that little bit more. The supermarket is one of just a few to offers discounts to NHS workers. And it was one of the first to set aside dedicated times for them to shop, also making food boxes available in hospital car parks.
It is going the extra mile for elderly and vulnerable customers too.
A call centre has been set up so that people who do not shop online can order food over the phone. Dedicated community workers can be found in every store, tasked with facilitating deliveries to stay-athome customers.
A service offering food boxes for next-day delivery has gone from 10,000 a week last month to 100,000 a week, and is expected to double in size over the coming weeks. There is even a Ramadan Essentials Box for Muslim customers, who began fasting during daylight hours for a month starting last Thursday.
Employee bonuses have been tripled and thousands of new staff have been recruited, in part to compensate for those who are unwell and self-isolating, or caring for sick relatives.
Even suppliers are receiving extra help. Farmers, local producers and other small firms are being paid early to ease their cashflow issues.
These initiatives come at a price – probably hundreds of millions of pounds – but it is almost certainly a price worth paying, cementing Morrisons’ reputation as a community-based business which takes its family heritage to heart.
The group has broader long-term potential too. Chief executive David Potts has been leading Morrisons through a recovery programme since joining in 2015, supported by chairman Andrew Higginson.
Both are veterans of the grocery trade. They have already made huge strides at Morrisons, but there is more to come.
Stores are intensifying their focus on locally produced fresh food and friendly service from knowledgeable staff. There is a rolling refurbishment programme, select new openings and a consistent focus on cutting unnecessary costs.
The group is developing a robust wholesale business, supplying McColl’s – a convenience store chain with about 1,500 outlets – with produce, as well as a number of independent garages.
This business alone generates sales of around £700million annually and turnover should reach £1 billion in the next few years.
The online service is expanding too, through the firm’s own website and in partnership with Amazon.
The group has already said that sales have risen during the lockdown. Potts will be providing a further update next month but brokers expect turnover of at least £18billion for the year to the end of January 2021 and £435million profit.
Extra dividends may be on the cards too. A dividend of 8.77p was declared for the year to January 2020, but that could be enhanced by a special dividend, as the group has given shareholders top-ups for the past three years.