Supermarket group Morrisons could realise buying synergy benefits with Safeway that are far in excess of estimates, according to influential retail analysts.
Morrisons expects to save£70 million in merging its own buying books with Safeway's, but analysts at Citigroup Smith Barney say Morrisons could achieve total buying synergies of more than£200 million.
The broker says that because Morrisons is now a£12 billion business, rather than a£5 billion one, it will be able to gain extra volume discounts from suppliers.
'We believe that the first£45 million of buying synergies will be achieved within a matter of weeks,' the broker notes. 'Morrisons will rightly expect to be treated with more importance than previously and to benefit from the increased efficiency for suppliers in dealing with one retailer rather than two.'
Prices on another 2,000 Safeway lines will be cut over the next month - Morrisons had already slashed prices on 800 lines.
Morrisons has earmarked 300 jobs to be axed in a first wave of cuts at Safeway's Hayes head office, and the consultation process has begun. The retailer expects 1,200 jobs will eventually go in total.
Morrisons is also close to selling off a first tranche of 52 Safeway shops it was ordered to offload by the OFT. Waitrose is tipped as the likely buyer.
Last week, Morrisons revealed record pre-tax profits of£320 million for the year to February, up 13.2 per cent on last year. Total sales climbed by 15.2 per cent to£4.94 billion.
No comments yet