Morrisons pledges food online with Ocado talks

Dalton Philips pledged to have an online food operation up and running by early next year. Picture: Reuters
Dalton Philips pledged to have an online food operation up and running by early next year. Picture: Reuters
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Supermarket group Morrisons today pledged an online food offering by January 2014 to take on its rivals as it unveiled its first fall in annual profits in six years.

Morrisons, the only one of the big four not to have a website for the home delivery of food, revealed it was in talks with lossmaking British online grocer Ocado that could lead to a partnership deal.

However, Dalton Philips, chief executive of the supermarket group, would not divulge the extent of the possible link-up saying it was “commercially sensitive”.

But he did say that Morrisons’ promise to be selling food online by early next year was not reliant on the Ocado talks coming to fruition.

He also defended himself against critics who have said Morrisons has been slow in developing its online and convenience store offerings, as the company over the past two years has taken stakes in New York online grocer Fresh Direct and bought the online Kiddicare business to learn about the technology.

“Thirty six months from having nothing, to going online [with food)], is a very fast pace,” Philips said, adding that Morrisons would accelerate its rollout of its M local convenience stores after recently buying 62 sites from the administrators of Jessops, HMV and Blockbuster to add to its 12 outlets.

Dalton said the group would have 100 M local sites open by January 2014, focused initially on London and the south east of England.

It came as Morrisons, Scotland’s third-biggest supermarket group, with nearly 60 big stores north of the Border, announced that pre-tax profits fell to £879 million in the 53 weeks to 3 February 2013. That compared with £947m in the previous 52 weeks. Philips said: “The past year has been incredibly difficult for the economy and, by extension, for the consumer.”

He said the torrid backdrop was likely to continue this year “as household budgets remain under pressure”.

He said supermarket “proximity” used to be the key factor in consumers deciding where to shop for their food, but this had been replaced by price and value.

Morrisons, whose HQ is in Bradford, took the sting out of the profits setback by posting a 10 per cent rise in the full-year dividend to 11.78p from 10.7p.

Philips said the horsemeat scandal had made shoppers “seriously angry” and had tainted the whole industry, but that Morrisons had not been directly affected because it had such control over the “provenance” of its own beef, pork and lamb products. However, he admitted the group’s current overall performance was unsatisfactory, with like-for-like sales down 2.1 per cent over the year. Turnover was up 3 per cent at over £18 billion.

Morrisons had to do a better job in telling customers how its products beat the opposition, Philips said, in particular citing its 5,000 trained butchers, bakers and fishmongers.