The resurgence of Morrisons continues: despite the retail slowdown, Britain’s fourth-biggest supermarket chain enjoyed a bumper 2008, with profits rising 7% to £655m as revenues jumped 12% to £14.5bn. Most impressively, like-for-like sales (not including fuel) were up nearly 8%, with Morrisons reporting that it’s now pulling in 550,000 punters a week more than it was in 2007. As a result of this better-than-expected showing, it’s ramping up its dividend by 21% and sharing out £34m in bonuses among its staff. OK for some...
The prevailing wisdom has been that Morrisons has profited from a ‘flight to value’, as customers seek out cheaper deals, but that may be doing the chain a disservice. On Radio 4 this morning, CEO Marc Bolland said that Morrisons was successfully winning custom from all its major rivals – not just the upmarket ones like M&S and Waitrose (whose 2008 profits were, by contrast, 6% down), or the big chains like Tesco, but even value retailers like Aldi and Lidl. Bolland puts this down to Morrisons’ strategy of being the ‘Food Specialist for Everyone’, and it certainly seems to have positioned itself shrewdly – it’s cheap enough to win on value, but it doesn’t look or feel cheap in the way the budget chains can.
Bolland is determined to take advantage of this ‘broadening appeal’, despite the ‘extremely challenging’ environment – instead of returning £1bn to shareholders in the coming year via a buy-back, Morrisons is now planning to spend its war-chest on growth. It’s identified 8m households that are more than 15 minutes away from its stores, so it reckons there’s plenty of room to expand – particularly down South, away from its Northern heartlands. After adding nine new stores to the existing 375 last year, it’s planning to open another 350,000 sq ft of retail space this year. ‘From national to nationwide’ – that’s apparently the new strategy…
With market share growing, more investment in distribution and infrastructure, and all the financial numbers heading in the right direction, we suspect shareholders won’t grumble too much about the cancellation of the buy-back. In fact, given Morrisons’ remarkable recovery since his arrival in 2006 (soon after a profit warning), we imagine Bolland can do very little wrong at the moment. The ex-Heineken man is clearly refreshing the parts that other supermarket CEOs can't reach.
In today's bulletin:
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Bonus time at Morrisons after bumper profits
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