Morrisons enters talks with online grocer Ocado as profits fall

Morrisons reported today that underlying profit before tax fell 4% to £901m while like-for-like sales fell 2.1%. Sales rose 3% to £18.1m. Like-for-like sales in the fourth quarter fell 4.1%.

The grocer confirmed it is to launch online grocery next year and is in discussions with online grocer Ocado to license its software.

However, Morrisons said the launch of an online grocery offer was “not dependent” on the outcome of discussions with the Hatfield-based etailer and an announcement about discussions would be made in due course.

The negotiations do not involve any discussion of Morrisons acquiring either the whole of, or an equity stake in, Ocado. Ocado said its existing partnership with Waitrose would be unaffected by any deal.

Retail Week revealed yesterday that Morrisons has parachuted in Kiddicare chief executive Scott Weavers-Wright as chief architect for food technology ahead of the online grocery launch. He will be replaced at the retailer by former Morrisons non-executive Nigel Robertson who joins the company on April 1.

Former Mothercare and Tesco director joins Kiddicare next month as commercial director.

Morrisons chief executive Dalton Philips said: “We may be a late entrant to the online food market but we have learnt from our involvement with Kiddicare and Fresh Direct. We have long been a leader in fresh food and our craft skills and vertical integration really set us apart from the competition.”

Morrisons said it had invested £40m of capital expenditure in its multichannel operations in the year, which will increase to £150m in the coming year.

The grocer has also increased its convenience store expansion plans by 40% and now plans to have 100 stores trading by the end of the year. Morrisons said it is on the hunt for a second distribution centre in the north of England to support this growth, following the opening of a first centre in west London to support stores in the capital and the Southeast this year.  

The grocer will also revamp a further 100 stores into its Fresh Format by the end of the year, which will represent 40% of its estate.

Philips said: “The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been. We have implemented a range of measures to address this and are making good progress in improving our promotional effectiveness and in communicating our points of difference.

“Recent events have underlined why it’s so important that we tell our customers how and why we’re different and what our vertical integration really means for them. Food quality, provenance and the issue of trust are at the forefront of consumers’ minds and these are all areas where Morrisons has something genuinely different to offer.”

Nielsen data released yesterday suggested Morrisons’ performance is starting to improve. The figures reveal Morrisons’ sales rose 1.2% in the four weeks to March 2 while Tesco’s fell 0.2% amid the horse meat scandal. Sainsbury’s was the strongest performer of the big four, up 7.7% while Asda rose 3.6%.