Morrisons stores

Morrisons building the momentum to withstand competition

Another quarter of like for like growth and Morrisons are within reach of a Golden quarter worthy of the name after too many weak Christmases.

Dave Potts has put in place a leadership team that could be considered a little myopic in the short term most coming from Tesco, but at least the team recognise what good looks like from their pre-Clarke years.

This team have pricing and store standards at the heart of the Morrisons turnaround. Focusing on delivering availability and keeping prices competitive (except perhaps Marmite at the moment) has helped restore customer’s trust.

The year ahead however, is unlikely to be plain sailing. The management team are making the right decisions but Morrisons lacks the same scale as its competitors and Brexit and National Living Wage will bring margin pressure that scale would help to buffer. Deals with Ocado and Amazon are pointing the grocer in the right direction, but the core business lacks depth of buy across broad ranges. Aldi are fast closing the market share gap and have a fraction of the lines of Morrisons.

In store visits we have undertaken, we have seen a lack of progress with Market Street. The capital spend in this area could be wasted unless clarity of vision is communicated to the store teams that are tasked with delivering it.

Productivity is one area where Morrisons have an opportunity if they employ improved methods. Great news for potential future savings but we are not sure they are best placed to be able to deliver the changes to achieve store efficiency without compromising the offer.

The control of inventory and flow of goods will only be improved through the adoption of their new, sales based ordering system. The transition from the old order writing to the new system may cause some hiccups along the way so we await with interest how they execute on this. Better than has been achieved on Market Street we hope.

The Morrison’s customer has not significantly changed, with an older perceived demographic than the other Big 4 grocers. Yet despite this they are growing. The job in front of the marketing team is to entice the younger and more dynamic customer into its formats. Once they are in, the even bigger job is to convert them to the largest counter service offer of all the grocers. This is not a way of shopping that the younger demographic are used to, considered slower and not as convenient.

We are about to be bombarded by the new season of Christmas ads and our interpretation of the teaser is that it will be traditional and family focused, a good fit for the brand. Our prediction is that this will be the last cheap Christmas before prices are affected by inflationary pressure so we expect price to play its role in the marketing message.

Morrisons have created some traction now but cannot afford to take their eye off the ball. We want to be able to look back in 6 or 9 months time and say Morrisons saw the new storm coming and were ready for it armed with productivity initiatives. Let’s see.

 

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