* Chairman defends Ocado deal
* CEO says outlook remains tough
* Says exploring customer loyalty card
By James Davey
BRADFORD, England June 13 Britain's No. 4 grocer
Wm Morrison Supermarkets told shareholders they will
have to be patient as the firm tries to catch-up with rivals
which have much bigger online and convenience store offers.
Morrisons, which trails Tesco, Wal-Mart's
Asda and J Sainsbury in annual sales, has seen profits
and market share dented by its late entry into online grocery
and convenience stores, markets which are growing in Britain at
about 16 percent and 20 percent a year respectively.
"We've got great colleagues, we've got great stores and
we've got a great balance sheet, so we have a platform to grow
on," Chief Executive Dalton Philips told shareholders on
Thursday at the firm's annual meeting in Bradford, northern
"But it's going to be tough and it's going to remain tough
until all these pieces start fitting together," he said.
Morrisons agreed last month to invest over 200 million
pounds ($314 million) in a 25-year deal with online grocer Ocado
that will see the firm start home deliveries by the end
of the year.
However, some analysts have said Morrisons is overpaying and
have questioned the length of the contract in a fast changing
market. And while Ocado's shares have recently hit record highs,
Morrisons have fallen about 9 percent over the last month.
Chairman Ian Gibson defended the deal. "Morrisons will move
from absolutely nowhere in online to a full offer in a little
over two years," he said, adding that the venture is expected to
be profitable by 2017.
"Most of the people you look at in the UK delivering online
food are still not profitable. They have been doing it for more
than 10 years."
Morrisons is also addressing its limited exposure to
convenience store markets as well as competition from
discounters Aldi and Lidl, targeting 100
convenience stores by the end of the year.
In response to a shareholder question Gibson said that
following recent investment in its IT capability Morrisons was
reconsidering whether to offer a customer loyalty/discount card,
something both Tesco, with its Clubcard, and Sainsbury, with its
Nectar card, have been doing for years.
"It's a new opportunity for us, we are looking at it, we
want to make a carefully thought out decision," he said.
Last month Morrisons posted a 1.8 percent fall in sales at
stores open over a year, excluding fuel, for its first quarter.
It expects like-for-like sales to remain negative in the 2013-14
Echoing comments from Sainsbury on Wednesday, Philips was
downbeat on the macro outlook.
"One third of our customers get to the end of the month and
they have nothing left over," he said. "We hear of mums who are
skipping meals so that they can feed the family."
Unlike previous years, Ken Morrison, the son of the founder
and a former CEO who has previously questioned the board's
strategy, did not attend, but the meeting was not without some
"Why the heck are we starting to sell clothing," said one.
Others were critical of the deteriorating quality of
Braeburn apples, "scraggy" carrots, and a decision to outsource
some accounts work to India.