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Morrisons' multichannel development 'on track' while Ocado discussions continue

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Morrisons this week said its multichannel ambitions were developing according to plan. The supermarket said it remained in discussions with online-only grocer Ocado as it prepares to launch its own online food ordering service by next January.

It is not clear what form any service run with Ocado would take. But today Ocado said, in a statement issued ahead of its annual general meeting, that the talks did not involve it being bought by Morrisons. "Ocado reconfirms that the arrangements under discussion do not involve Morrison acquiring either the whole of, or an equity stake in, Ocado," it said. "Discussions are ongoing, and there can be no certainty that an agreement will be reached. A further announcement on this topic will be made in due course."

Rather, it said: "The talks "may lead to an agreement to facilitate Morrisons commencing an online business in the UK." But it emphasised that any agreement would be complementary to its existing partnership with Waitrose. "Product would continue to be sourced with Waitrose, and Ocado customers would continue to buy exclusively from the existing Ocado, Waitrose and branded ranges," it said in a statement.

Morrisons' update came yesterday as it released its first financial figures of the year, which showed falling like-for-like sales, something some commentators put down to Morrisons' slowness to move online. When its service launches it will be the last of the big four major UK grocers to offer online grocery ordering.

But its chief executive Dalton Philips sounded a reassuring note as he said: “Strategically our ambition of building a genuinely multi-format, multichannel Morrisons is right on track.”

To date Morrisons' multichannel development includes its acquisition of online nursery pureplay Kiddicare, for which it has now developed bricks and mortar stores, and its launch, last year, of wine specialist Morrisons Cellar.

Morrisons' interim management statement showed that total sales excluding fuel lifted by 0.6% in the 13 weeks to May 5. But like-for-like sales in the first quarter were down by 1.8%.

Dan Coen, director at advisory and restructuring firm Zolfo Cooper, said: “Morrisons has paid the price for not selling food online. However, a turnaround may be on the horizon as the grocer is poised to launch an online offering, as well as rolling out up to 100 M Local convenience stores.

"Partnering with the likes of Ocado would certainly give the supermarket a ready-made platform for a successful online business. However, the joint venture remains a rumour and Morrisons may need to re-think its strategy if a deal is not confirmed in the coming months.”

In its AGM statement, Ocado also said that its second customer fulfillment centre, in Warwickshire, had opened in February, on time and on budget. It added: "The company has continued to grow sales as it benefits from increasing loyalty and spend from existing customers and attracts new shoppers, supported by further expansion in customer demand for online grocery shopping.
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