Food manufacturing to play key role in Morrisons’ revival

By Laurence Gibbons contact

- Last updated on GMT

Food manufacturing will play a key role in Morrisons' recovery
Food manufacturing will play a key role in Morrisons' recovery

Related tags: Management, Morrisons

Food manufacturing’s key contribution to Morrisons’ recovery was again highlighted by leading City analyst Shore Capital, following a meeting with the troubled retailer.

Initiatives – such as the retailer’s ‘Made by Morrisons’ – would help the troubled business provide a stronger offering to consumers, Shore Capital’s analysts Clive Black and Darren Shirley said.

“Already we see encouraging initiatives such as ‘Made by Morrisons’, more new lines that are better profiled and clearer, and more impactful promotions/gondola ends plus better availability in most of the stores that we visit,”​ they said.

‘Stronger proposition’

Morrisons’ “stronger proposition”​ would also be built around individualistic pricing, product authenticity and provenance and a focus on the exclusivity of its Market Street, they added.

The retailer would continue to fix the fundamentals of the business, off the back of listening to consumers, and reshape its management board before shouting about the changes, Black and Shirley said.

“That change makes for a relatively low overall profile for Morrisons in the UK grocery market at this time,”​ they said.

“In seeking more solid fundamentals the business, sensibly in our view, management is stabilising matters before it seeks to welcome more shoppers with a stronger proposition in due course.”

Morrisons reiterated its six-point plan​ to become more competitive and return the business to growth.

Six-point plan

These included exiting from underperforming assets, such as Kiddicare and M-Local; £1bn programme to lower operating costs; £600M reduction in working capital; almost £1bn cut in capital expenditure and a commitment to run to a rate of £400M – £450M.

Morrisons has already lowered its working capital to £350M.  

Clearly, Morrisons needs an improvement in trading for its shares to appreciate in value, Shore Capital claimed.

“Aside from deflation, Morrisons’ top-line also suffers from the expedition of the necessary simplification process as management seeks to unwind a myriad of initiatives, which proved ineffective in driving sales in the past,”​ it added.

Over the next three to six months the business should be cleansed of all the bells and whistles of pay-day promotions, Christmas collector schemes, Match & More and wider promotions, coupon and vouchering, Shore Capital said.

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1 comment

Morrisons is Doomed!

Posted by RC,

Morrisons is doomed and only a takeover bid can save its shareholders. The acquisitive South African businessman Christo Wiese has 19% stake in grocery chain Iceland and he appeared to raise the idea of an expansion of his Brait investment vehicle into the UK supermarket sector. It seems he and the other members of the consortium which bought Iceland will take over Morrisons and merge the two businesses. This way Morrisons will have hundreds of convenience stores. I believe they will do it sooner rather than later as Morrisons said the profit in the second half will be higher than the first and Moody's said on 16/9/15 that the outlook for Morrisons remained stable, with operating performance "likely to stabilise in the second half of FY2015/16″ and according to DigitalLook, Morrisons is expected to increase EPS by 18% in FY2016/17. I believe a takeover bid would be for at least £3 a share.

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