Retailer in deal to extend its online grocery reach

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Morrisons has announced plans to extend its own online grocery deliveries to the whole of the UK ​under a new ​agreement with Ocado.

The Bradford-based grocer will​ take space in a new Ocado London warehouse​, which will enable it to deliver to areas south of the River Thames where it doesn’t currently deliver.

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.

Analyst Bruno Monteyne at Bernstein said: “Importantly this new deal with Ocado is not yet done but depends on Morrisons achieving profitable growth online. What a nice way to put pressure on this partnership.

“CEO David Potts is making his own mark on Morrisons’ chequered deal-making past. In 2015, he closed the convenience chain that his predecessor Dalton Phillips expensively built by buying Blockbuster stores.

“Dalton Phillips then spent more than £200m on an online deal with Ocado that gives him access to only 50 per cent of Morrisons’ customer base. David Potts already indicated that while it is great for customers, it isn’t great financially and operationally other solutions seem more appropriate (click and collect).”

Clive Black at Shore Capital raised the question of whether Morrisons’ talks with Ocado could be a “re-negotiation of what we believe has been an unduly onerous contract”.

Last month ​Morrisons, which ​has just under 500 stores, 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.