Morrisons' Amazon deal propels it back into FTSE 100 as share price surges

MORRISONS is to rejoin the FTSE 100 index of leading shares following a sharp jump in its share price on the news it has signed a lucrative deal with internet giant Amazon.

Morrisons chief executive David Potts

A final decision will be made on Wednesday, but judging by its share price on Tuesday the Bradford-based grocer will 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.

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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 have shot up eight per cent on the new of the Amazon tie-up.

They closed up two per cent on Tuesday at 203p.

The grocer narrowly missed relegation in the June and September reviews last year and the demotion ended 14 years in the top flight.

​Morrisons landed a coup against its rivals earlier this week by winning a lucrative deal to supply fresh food to global online giant Amazon.

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 of launching its own service.

The deal is expected to introduce wealthy Amazon Prime customers to Bradford-based 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.​

​Morrisons signed a £170m contract with Ocado in 2013, providing the supermarket with its first online delivery service.

Morrisons said its amended agreement with Ocado is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online.

It added that there can be no certainty that an agreement will be concluded.

Last month ​Morrisons reported a 0.2​ per cent​ rise in ​like-for-like ​sales in the nine weeks to January 3​, marking a turnaround after recent hefty sales declines.

It was followed by a fresh drive by the supermarket at the beginning of February to snap up more customers by cutting the prices of more than 1,000 products.

Morrisons is being promoted to the top flight alongside bookmaker Paddy Power Betfair and healthcare specialist Mediclinic International. Events company Informa could also be promoted.

High street chain Sports Direct, fund manager Aberdeen Asset Management and drugs company Hikma Pharmaceuticals will all be demoted to the FTSE 250. Engineering firm Smiths Group could also join them.

Shares in Sports Direct, controlled by Newcastle United owner Mike Ashley, have fallen 50 per cent over the last year as the firm continues to be mired in controversy while Aberdeen Asset Management has seen its stock fall 45 per cent.

Bookmaker Paddy Power completed a £5bn merger with Betfair on February 2.