Five ways Morrisons will build on 2020’s momentum

Date : 11 March 2021

Nick Gladding

Senior Retail Analyst

Following the release of its annual results we look at five ways Morrisons will look to build on its trading momentum in the year ahead.

Headline results in brief (52 weeks to 31 January 2021)

  • Group LFL sales: +8.6% (2019/20 -0.8%) comprising retail +7.8% and wholesale +0.8%
  • Q4 LFL growth: +9.0% with retail contribution +8.2%, up on the +7.3% for the first nine weeks of the quarter revealed in Morrisons Christmas trading statement
  • Total 2020/2021 revenue: +0.4% to £17.6bn (pulled down by a 32.4% fall in fuel sales)
  • Profit before exceptionals and tax: -50.7% to £201m, impacted by £290m of direct COVID-19 costs. (Net of the business rates relief repayment, profits would have risen 5.6% to £431m)

Five priorities for 2021

1. Online acceleration

2020 was a transformational for Morrisons online operations and the retailer has many levers to build on this progress in the year ahead. Last year online sales tripled, enabled by a fivefold increase in capacity through as Morrisons became a multi-platform operator. Key here was the rollout of the Morrison at Amazon service to 50 towns and cities and the expansion of the Click & Collect to almost 450 stores.

Morrisons has also scaled up the number of its stores with store pick operations for home delivery to almost 200, giving it a model to cost effectively reach more catchments. Morrisons will also benefit this year from re-starting deliveries from Ocado’s Erith fulfilment centre – these were paused to give Ocado extra capacity following a fire at its Andover centre. Morrisons will now take 30% of the capacity at this SE London facility. Rapid delivery is another opportunity; Morrisons partnership with Deliveroo already operates from over 180 stores. Food boxes, a big success last year could also remain a permanent channel for Morrisons to reach more customers.

2. Sharper price positioning

Across a basket of 2,000 customer favourites, Morrisons cut prices by £120 across 2020/21, with deflation sustained throughout the year and volume growth exceeding sales growth.  Morrisons is committed to further price cuts on its Price List to build on this progress. To do this and also support investments in stores and service, Morrisons will continue to invest in major cost saving, productivity and supply chain activities.

3. Own brand relaunch underway

Over the next two years, Morrisons will improve the quality of its own brand offer with plans to relaunch 6,000 items across its mid tier, Best and Nutmeg home ranges. Range innovation will also be a focus. To this end Morrisons recently launched its ‘Nourish’ healthier food range that offers specific health benefits, for instance good for the bones, gut, heart, skin or immunity.

4. Expanding local reach

By working with a number of convenience store partners, Morrisons now supplies over 1,350 convenience stores. In the last few months the retailer has begun supplying the last tranche of McColl’s stores it did not already supply and over the next three years 300 McColl’s stores will be converted to the Morrisons Daily format. The conversions will see these stores offer a full Morrisons convenience offer though they will continue to be owned and operated by McColl’s.

5. Digitising operations

Having added an objective to be ‘naturally digital’ to its priorities last year, Morrisons will roll out new technologies to improve productivity across the business this year. 2021 is likely to see the rollout of the Scan & Shop and payment digitisation that is currently in trial. This will remedy a long standing difference from other Big Four players which all have similar technologies. Morrisons has also started to test digital shelf edge labels, a technology which will help automate price changes, simplify stock and systems routines and improve the online pick process.

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