Morrisons today reported online growth of 48% in first half of its financial year as it finds more ways to serve ecommerce shoppers. The retailer is now looking to increased online profitability as one of the ways in which it will meet the “continued challenges” of Covid-19 and increased costs in the supply chain. It is expecting prices to go up across the grocery sector in the second half of the year, as a result of commodity price increases and a shortage of HGV drivers – but expects that the costs of Covid-19, marketing and stakeholder discounts will be lower, while online and wholesale profitability are set to improve. It plans to consolidate its pick-from-store operations by stopping home deliveries from 50 shops from October, with affected staff offered an alternative job or the option of voluntary redundancy. Delivery will continue from around 150 shops as well as fulfilment centres.
The update came as Morrisons today reported total revenue of £9.05bn in the half-year to August 1 2021. That’s 3.7% up on the same time last year. Pre-tax profits fell by 43.4% to £82m from £145m a year earlier. The supermarket pointed to one-off costs including £19m on transforming and expanding its online and home delivery services, £41m in Covid-19 direct costs and £80m in lost profits from its in-store cafes, petrol stations and food-to-go ranges, which were also all affected by the pandemic.
Morrisons chair Andrew Higginson says: “Across the business the whole Morrisons team has shown commendable resilience facing into a variety of continuing challenges during the first half, including the ongoing pandemic, disruption at some of our partner suppliers, and the impact on our supply chain of HGV driver shortages. As we approach our busiest time of year, I’m confident the team will continue to rise to all challenges and keep up all the good work to improve the shopping trip for customers.”
Widening online services
The supermarket, a Leading retailer in RXUK Top500 research, continues to expand its widening range of online channels, supplying customers via Amazon in more than 60 towns and cities and via Deliveroo from 328 branches of Morrisons. Sales in the first half of the year were 48% up on the same time last year, and over two years have grown by 237.1%. The retailer says that its same-day ‘Morrisons on Amazon’ delivery service is available to 60% of the British population and now accounts for more than 10% of sales in most of the shops that offer the service. The service, it says, remains popular even as the UK emerges from lockdown. Morrisons also supplies the till-free Amazon Fresh UK stores, which started to operate earlier this year and are powered by Amazon’s ‘just walk out’ technology. Its Deliveroo service delivering an average of almost 12 items to customers in as little as 30 minutes, while 35 Morrisons cafes offer a Deliveroo takeaway service – a number that is set to expand over the next year.
The retailer is supplying 1,200 McColl’s convenience stores, of which more than 80 are now converted into Morrisons Daily stores. McColl’s is currently trialling on-demand local home delivery from Morrisons Daily shops in partnership with Uber Eats.
Morrisons’ online channels include home delivery and click and collect via its own website, operated in partnership with Ocado, and a range of home delivery boxes. The supermarket says that it has added hundreds more products to its own direct service, including some that are made in in-store or sold from in-store counters. It is now investing in the efficiency of its pick-from-store morrisons.com service, spending on picking capacity and dedicated delivery vans, and it says its use of Ocado’s Erith customer fulfilment centre is back to normal following a recent fire that caused temporary disruption. NHS workers continue to enjoy access to a free Morrisons ‘anytime’ delivery pass for online shopping.
Home delivery from fewer stores
Morrisons plans to consolidate its store-pick home delivery operations, ending deliveries from about 50 shops from October, and continuing to deliver from 150 shops and from its fulfilment centres. The retailer says in today’s half-year statement that customers will continue to see the same service levels, and adds: “All colleagues affected by these proposed changes will be given the opportunity to either apply for voluntary redundancy or move into an alternative role within Morrisons.”
A Morrisons spokesperson says: “At the start of the Covid-19 pandemic we rapidly grew our store Home Delivery service to serve the many customers who moved from shopping in store to online. As we enter this next phase of the pandemic and with many restrictions now eased, we must now adapt and make some changes to the size of our online operation to meet our customer demands.
“From October, we plan to close online home delivery in a number of stores. We will continue to maintain the same service levels including the number of customers and postcodes we deliver to, through our existing home delivery stores as well as our fulfillment centres.”
Wider strategy
Morrisons wider strategy includes offering competitive prices, serving customers better – through online and convenience stores, serving local communities, simplifying and speeding up the business, being naturally digital, taking pride in hygiene, and scaling for growth. Digital measures including digital shelf edge labels for automated pricing and stock updates, a store mobile app that enables staff to manage stock and forecast orders and QR code ordering in its in-store cafes. It has introduced a My Morrisons digital loyalty scheme via a mobile app that can be scanned at in-store checkouts for personalised offers and till receipts.
On logistics, the retailer says it has launched a new recruitment programme targeting its own staff and their families and friends, and now plans to fast-track hundreds of potential HGV drivers that it has identified through training that it will fund.
Today’s figures come with an update on the takeover offers currently in play. Morrisons is recommending a 285p per share offer from CD&R, which will go to its court meeting and general meeting for approval around the week of October 18. It previously recommended a bid from Fortress Investment Group.
* This story was updated on September 13 to include a comment from a Morrisons spokesperson.
