Morrisons hails Amazon partnership a ‘kicker for sales’

Despite a spectacular fall in profits, CEO David Potts praised the supermarket group’s entrepreneurial spirit and online growth, which has been helped by its tie-up with Amazon, with speculation mounting around a possible takeover.

MorrisonsProfits at Morrisons took a huge Covid-related hit last year, dropping by half, but Britain’s fourth-largest supermarket is still confident that a developing partnership with Amazon and established technical relationship with Ocado points to a healthier 2021.

The group posted a dramatic profit fall of 50.7% to £201m in the year to 31 January, almost totally due to the cost of operating during the pandemic.

Talking on a press briefing this morning (11 March), Morrisons CEO David Potts described the £290m spent on keeping stores open through the year as “a badge of honour”. “Frankly, we could have made no profit and it would have been a result,” he added.

Had the £290m expenditure not come into play, profits would have reached a far more palatable £431m.

Potts said the supermarket has been on a war footing and insisted Morrisons had been taking on new ideas and approaches as it looks to adapt to the events of the past 12 months and advance on a broader front than previously. “There’s an entrepreneurial spirit running through this company, and online is a great example of this,” he said.

Getting on was always going to be a kicker for sales revenue.

David Potts, Morrisons

The CEO highlighted the fact Morrisons can be ordered online via Amazon, which opened up the group to a huge market of Prime customers. The supermarket is also supplying the recently opened Amazon Fresh till-free store in Ealing, West London, which currently stocks 800 products supplied by Morrisons.

“Getting on was always going to be a kicker for sales revenue,” Potts said. “That’s really working well for us as we go through store pick in an increasing number of stores. It’s great for bricks and mortar, because it drives volume into those facilities, and customers are really tucking into it.”

Recent research into online grocery sales from consumer data platform NielsenIQ found that Morrisons was the fastest-growing supermarket of the big four, boasting an 11.7% boost in performance during the four weeks up to 27 February.

Rumours of a takeover

Rumours continue to circulate that Morrisons could be vulnerable to a takeover from Amazon and, with the partnership with the tech giant looking increasingly cosy, coupled with Morrisons tumbling out of the FTSE 100 and the preliminary results for last year looking, on the immediate surface at least, rather shaky, this could be perfect timing for such a move.

Amazon has long been keen on moving into the grocery sector and last year began to roll out cashier-less convenience stores in the US, along similar lines to the Ealing shop. Earlier this year Amazon’s CFO Brian Olsavsky confirmed the business’s expansion strategy for this year would notably include “going into grocery”.

Potts refused to be drawn on the possibility of a takeover, but again stressed Morrisons’ increased success with online services and offerings. “We’ve doubled our market share in a year, we’re upbeat on online profit and expect it to keep improving,” he said.

Meanwhile, having announced earlier this week that the supermarket group intends to have all its UK own-brand products sourced from suppliers with zero-net emissions by 2030, Potts flagged Morrisons’ ambitions around sustainability.

“It underpins everything that we do,” he said. “We know we have a part to play in climate change. Delivering sustainable growth with low environmental impact is now the North Star for Morrisons.”