Morrisons gets online with Ocado deal

Supermarket chain Morrisons has announced that it will be selling its products online by the end of 2013, as it revealed that it is considering a tie-up with Ocado.

by Michael Northcott
Last Updated: 19 Aug 2013

Some have been concerned about Morrisons’ long-term future in recent months, owing largely to the fact that it has next to nothing in the way of an online offering. But the supermarket chain today attempted to sweeten its announcement that profits and sales have fallen over the last 12 months with the revelation that it will get an online strategy going by the end of the year.

The firm reported a 7.2% drop in pre-tax profits to £879m in the 12 months to 3rd February, marking the first fall in annual profits the firm has suffered in six years.  Like-for-like sales in the period were also down just over 2%.

Chief executive Dalton Philips made out as though Morrisons has been deliberately waiting before launching an online offering to combat any contraction. He said: ‘We will be transacting online with food by the end of this year. We’ve been studying the market for two years [and] it’s a market that is accelerating very quickly.’ At least he’s finally noticed.

So how exactly is Morrisons going to turn this around so quickly? Well, it's in talks with Ocado about some sort of tie-up - at the moment it's just about sharing technology and know-how, but it would be a logical fit for Ocado to be snapped up. Ocado said that the talks have not so far included any suggestion of Morrison acquiring Ocado or even buying a stake, and added that its current tie-up with Waitrose would not be affected.

But Ocado is a loss-maker and has long been seen as a potential takeover target, especially given the intensifying race for online market share between the major supermarkets. Shares in the food delivery service rose 11% in early trading on Thursday, and Morrisons shares rose 4% - significant given the profit drop. There are thus plenty of synergies to be spotted, even if the 'brand fit' is a little, ahem, questionable.

Whether or not Morrisons can get itself back in the race with whatever form the Ocado deal takes remains to be seen. But falling profits were evidently the wake-up call that it needed… 

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