Staff at Morrisons will be coming in to work today with a spring in their step having heard that the retailer has rejoined the FTSE 100 index of leading shares.
This follows a sharp jump in its share price on the news it has signed a lucrative deal with internet giant Amazon.
The Bradford-based grocer will officially regain its place among Britain’s top 100 companies later this month. A promotion to the FTSE 100 will be a shot in the arm for CEO David Potts and his new team, who are working hard to rectify the mistakes of the previous management.
Morrisons was kicked out of the FTSE 100 index at the end of last year following a sharp drop in its share price amid falling sales, profits and market share.
Morrisons’ shares fell by more than a quarter last year after hitting a high of 208p in March shortly after the appointment of Mr Potts.
However, they have recovered on the news that it had a positive Christmas and this week they shot up nine per cent on the news of the Amazon tie-up. They closed on Wednesday at 205p.
The demotion last year ended 14 years in the top flight and was a bitter blow for the firm. As one insider said on the news of the promotion: “Happy days are here again”.
The big supermarket players have been quaking at the thought of Amazon stealing their customers by launching a version of its US Amazon Fresh service in the UK, but the online retailer has selected Morrisons as its partner instead.
The deal is expected to introduce wealthy Amazon Prime customers to Morrisons’ cut-price fresh and frozen food offering.
Morrisons made a late entrance to online and only has around three per cent of the UK online grocery market so it is bigger rivals Tesco, Sainsbury’s and Asda that are expected to be hit by Amazon’s entry into fresh food.
Morrisons has also announced plans to extend its own online grocery deliveries to the whole of the UK under a new agreement with Ocado. It will take space in a new Ocado London warehouse, which will enable Morrisons to deliver south of the River Thames, where it doesn’t currently operate.
Ocado will also provide Morrisons with software to fulfil online orders from its own stores, allowing Morrisons to enter the Scottish and North East online market for the first time.
Mr Potts, a former Tesco director, has made some canny decisions since he joined Morrisons and these new contracts with Amazon and Ocado are just what the company needs.
But the real test will come next Thursday when Morrisons reports its annual results.
Arch rival Leeds-based Asda has accused Morrisons of buying market share at Christmas with deep discounts. Asda particularly pointed to Morrisons’ cheap booze deals over the festive period.
We will find out next week exactly how much this has dented Morrisons’ profits.
Asda’s mantra is profit is sanity and sales are vanity, ie, anyone can improve their sales if they give stuff away for free.
But isn’t this missing the point? When British Gas announces yet another hike in profits, no-one says: “Oh that’s good, the shareholders are getting a nice pay-back.”
The supermarket sector showed outrageous arrogance with yo-yo pricing and BOGOF offers that ripped off customers for years. During that time their shareholders made a very nice, fat profit and it wasn’t until Aldi and Lidl came on the scene that anyone started to champion the customer.
So what if shareholders suffer lower profits?
It’s about time the big supermarkets put their customers first. Asda shoppers couldn’t give two hoots whether Asda is maintaining its profit margins.
They want low prices and if the big four can’t provide them, they’ll decamp to Aldi and Lidl. In fact they already have.
Morrisons is on the right path with its bid to slash prices and return the Northern retailer to the value roots that Sir Ken safeguarded for decades.