UK grocer Morrisons has dismissed suggestions it has no definitive plan on how it will launch an online grocery offering, insisting that the “green light is on”.
Morrisons this morning (14 March) revealed it is in talks with specialist online food retailer Ocado on a deal that could help the supermarket chain with plans to set up an online service. The supermarket group said it is in negotiations to “licence certain of Ocado’s intellectual property and operating knowledge” as it looks to launch an online grocery business in the UK. It has, however, stopped short of offering any details on the talks.
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Morrisons today published a set of full-year figures that fell short of expectations. The grocer admitted it lacked a meaningful presence in the two fastest growing sectors of the market: online and convenience.
Speaking at a press conference in London, CEO Dalton Philips was keen to emphasise that plans for an online grocery offering are now underway and are not solely dependent upon the talks with Ocado.
“We have a very specific plan on what we are doing, how we are going to deliver it and what the proposition is, but we are not going to be drawn into details at this time.
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“Around 24 months ago we said we couldn’t ignore the online food market but we needed to understand it a lot better. We have spent the last 24 months really investigating this market. We have been consistent in saying, if we do it, we want to do it in the right way. We have got a big, strong core and we feel very confident we can to this. It’s our decision to go online, it is not dependent on Ocado.”
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By GlobalDataPhilips said the online offering will launch by the end of Morrisons’ financial year. It will, he said, be “customer focused with fresh food at the heart and it will be unmistakably Morrisons”.
“We have experience in online and when we do go online [with grocery], it will be truly distinctive. From going to not having anything and going online in 24 months is very fast paced.”
Philips told just-food the investment in the online grocery business will be “GBP150m (US$445.3m) this year in capital from multi-channel development”. Asked when Morrisons can expect the business to be profitable, he added: “I can’t give guidance on that, but as I’ve said before, it needs to be profitable and it needs to be distinctive.”
Like many analysts, Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers believes Morrisons has been slow in developing its online presence and is “under pressure”, particularly from discount rivals such as Aldi.
“The 48% increase in net debt – whilst perhaps understandable for future progress – has come at a difficult time,” he notes. “With the ongoing loss of market share and pressure on margins also in the mix, investors are likely to continue to give the company a wide berth.”
The supermarket group this morning revealed a 6% drop in net profit and a 2.1% drop in like-for-like sales, which the grocer said reflected sustained pressure on consumer spending.
Philips, however, was keen to assure journalists that its shareholders are supportive of its strategy and that the business was in good shape, despite the losses.
“This is an incredibly strong business. One of the best balance sheets in retail, globally, with strong dividend growth. Shareholders have challenged us about the particulars of going slower and faster in new channels. Shareholders buy and they sell. We are confident the shareholders we have are supportive of our strategy.”
“Shareholders are more interested in return on capital and we have said that if we go online it will be distinctive for shareholders and Morrisons. It will be a Morrisons offer, it will be distinctive and it will be everything that is good about our business.”
