Morrisons chief expected to reveal online sales plan

MORRISONS chief executive Dalton Philips will come under pressure this week to reveal details of his online plan as the supermarket chain battles against its bigger rivals.

Britain’s fourth-biggest grocer drafted in television presenters Ant and Dec to promote its in-store bakers and butchers in an advertising campaign after a 2.5 per cent fall in sales over Christmas.

But the latest figures from market researcher Kantar Worldpanel suggest there has been little impact yet, 
after Morrisons was the only retailer to post a sales decline – down 1.3 per cent in the 12 weeks ending 17 February.

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Yet the chain appears to have been one of the winners during the horsemeat scandal, with sales at its butchers counters up 18 per cent since the fiasco began.

The City expects the group to fight back against its rivals by expanding its chain of convenience stores and unveiling an internet strategy.

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Analysts think it could start by offering customers a “click-and-collect” service at stores.

Sally Ronald, an analyst at Deutsche Bank, said: “With the core business under pressure, the most benign option for the share price would be a defensive strategy offering click-and-collect from stores on a trial regional basis.

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“A more aggressive approach committing to a fresh model akin to US FreshDirect – potentially leveraged from the new distribution centre in west London currently billed as convenience-store fulfilment – would differentiate Morrisons strategically.

“However, any prospect of significant capital expenditure and start-up losses could pressure the valuation.”

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In the past few weeks, Morrisons has swooped on 49 shops from failed DVD and games rental chain Blockbuster and seven from collapsed camera retailer Jessops, taking advantage of the quick access to high-street locations to expand its convenience store business.

James Grzinic, an analyst at house broker Jefferies, said: “We expect Morrisons to confirm a focus both on improving the performance of its core estate and on addressing its lack of exposure to convenience and online. This could be accompanied by reduced new space targets. The greater urgency in tackling its lack of convenience offering, with the original target for 70 M-locals by January 2014 already delivered following the acquisition of 56 high-street locations in recent weeks, is evident.

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“Food online expansion may be more tentative, given less straightforward economics.”

Consensus forecasts suggest Morrisons will unveil an underlying pre-tax profit of £853 million for the year to 
3 February when it reports on Thursday, down from £939m in the previous 12 months.

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But Deutsche Bank thinks the underlying figure could be closer to £809m once £50m of development costs are stripped out – a step that its analysts said had not been taken by other brokers when calculating their predictions for the supermarket chain.