Morrisons’ supply chain is ‘a key strength’: analysts

By Michael Stones contact

- Last updated on GMT

Morrisons’ management, led by Dave Potts, deserves ‘considerable credit’ for reviving the manufacturer's fortunes
Morrisons’ management, led by Dave Potts, deserves ‘considerable credit’ for reviving the manufacturer's fortunes

Related tags: Morrisons, Customer service, Vertical integration, Marketing

Morrisons’ role as a food manufacturer – supported by its vertically integrated supply chain – is a unique sales point, which should be communicated more effectively, according to analysts, after the retailer reported its second quarter of rising sales.

The ‘Morrisons Makes It’ marketing campaign, which highlighted “Morrisons’ unique supply chain strengths”​ has been “under-communicated until now”,​ according to Verdict Retail.

Senior analyst George Scott said: “Given the intensity of price competition, it is a key point of difference. Indeed, Asda’s over-reliance on price shows that the Big Four ​[supermarkets] need to give shoppers more reasons to visit to elevate themselves above the discounters.”

City analyst Shore Capital also highlighted the strategic importance of Morrisons’ food manufacturing capability and its promotions to consumers.

“Perhaps most important of all, the personality of Morrisons is being re-found, tailored around the Market Street proposition and the vertical integration that underpins it,” ​said Shore Capital’s Clive Black and Darren Shirley.

“In this respect we see Morrisons ‘doing’ events much, much better year-on-year.”

‘Stand out from the pack’

While much remained to be achieved, Black and Shirley said there was reason to believe “Morrisons’ proposition can further evolve to benefit the customer, stand out from the pack – particularly the limited assortment discounters and Asda and so support underlying sales”.

Both Verdict Retail and Shore Capital agreed the supermarket’s management team deserved praise for reviving the retailer’s fortunes.

Scott said: “Morrisons’ leadership should be praised for the recent speed of its recovery. Its balanced move to refocus its proposition around it heritage of fresh food and mid-sized supermarkets as well as remaining relevant and competitive on price is proving effective.”

As the impact of store closures and the sale of its convenience estate began to decrease, its progress would feed through to topline sales and profit growth, he predicted.

‘Morrisons’ management deserves considerable credit’

Shore Capital’s Clive Black and Darren Shirley said: “We believe that Morrisons’ management deserves considerable credit for the stabilisation achieved to date.”

Personality of Morrisons

“Perhaps most important of all, the personality of Morrisons is being re-found, tailored around the Market Street proposition and the vertical integration that underpins it.” 

  • Shore Capital

The return to customer growth – “the key driver of the better underlying sales performance of recent times over basket size” ​– was achieved against a challenging competitive backdrop and the withdrawal of some initiatives, such as coupons, they added.

“A stable and complete executive team is now pressing on with creating the resources for a business that can sustain competitiveness,” ​said Black and Shirley.

Meanwhile, Martin Lane, a representative at www.money.co.uk​, worried about the retailer’s commitment to TV advertising.

“While Morrisons have reported positive results, I am concerned that they are investing heavily in expensive television advertising to realign their brand rather than focusing on reducing prices or offering something unique in store,” said Lane.  

“Although TV undeniably still works, customers are looking for an excellent customer service experience coupled with consistently low prices. I hope Morrisons will have enough money left over after this big brand refresh to make sure they are delivering what will keep the trolleys rolling in.”

Yesterday (May 5) Morrisons reported its second quarter of rising like-for-like (LFL) sales, in results covering the 13 weeks to May 1.

LFL sales, excluding fuel, rose by 0.7% and by 1.2% including fuel. Total sales, excluding fuel, fell by 1.8%, which reflected the impact of supermarket closures and the exit of the retailer’s M local chain.

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1 comment

How about aligning "success" with share price

Posted by James Drummond,

Potts is certainly an improvement from disastrous Dalton but shareholders have yet to see any real rewards. The SP was about 180p when Dalton got the push, currently still under £2. In the last year the divi has been chopped from over 13p to 5p.

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