Reuters: Hot Stocks: UPDATE 2-UK grocer Morrisons to go online in bid to catch rivals

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UPDATE 2-UK grocer Morrisons to go online in bid to catch rivals Mar 14th 2013, 10:32 Thu Mar 14, 2013 6:32am EDT * To launch online food offer by Jan. 2014 * In talks with Ocado on possible commercial deal * 2012-13 underlying profit down 4 pct to 901 mln stg * CEO expects negative like-for-like sales in 2013-14 year * Morrisons shares up 1.1 pct, Ocado up over 20 pct (Adds CEO, analyst comment, detail, shares) By James Davey LONDON, March 14 (Reuters) - Britain's Wm Morrison Supermarkets plans to launch an online food business within a year, possibly with the help of specialist Ocado , as it battles to catch up with rivals after posting its first profit fall for six years. Britain's fourth-biggest grocer has held back from the fast-growing online grocery market because of doubts over its profitability. Ocado has yet to make a pretax profit in around ten years of business. But analysts have blamed Morrisons' absence online, as well as its late entry into the convenience stores market, for its recent sales underperformance. Rivals like market leader Tesco and number three J Sainsbury say their online customers tend to be their most loyal, shopping in stores as well as on the web. "In an online world, Morrisons isn't online, and that says it all," said Phil Dorrell, director of retail consultants, Retail Remedy. Britain's online food market is currently growing at around 16 percent, and is set to almost double in value over the next five years to 11 billion pounds ($16 billion), Morrisons said. The group said on Thursday it would launch an online grocery business by January 2014. Details were sketchy, but the firm said it could involve tapping the technology, capacity and operating expertise of Ocado. The two companies said they were in talks, but that discussions did not involve Morrisons buying all or part of Ocado and that they would not affect Ocado's existing deal with upmarket grocer Waitrose, which provides many of its products. "This is one of the options open to us and our decision to enter the market is not dependent on the outcome of these discussions," Morrisons Chief Executive Dalton Philips said. Shares in Morrisons, down 10 percent over the last year, were up 1.1 percent at 274.5 pence by 1000 GMT. Shares in Ocado, which also reported a 14.4 percent rise in sales for the 12 weeks to Feb. 24, jumped over 20 percent. "Much needs to be done, but at least Morrison has joined the party," said Panmure Gordon analyst Philip Dorgan. NEED FOR CHANGE Morrisons' results for the year to Feb. 3 showed the need for change. The group made an underlying pretax profit of 901 million pounds, in line with analysts' reduced expectations but down from the 935 million pounds made in the 2011-12 year. Though turnover rose 3 percent to 18.1 billion pounds, sales at stores open over a year, excluding fuel and VAT sales tax, were down 2.1 percent. "The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been," said Philips, who expects like-for-like sales to remain negative in the 2013-14 financial year. Morrisons did, however, raise its dividend for the year by 10 percent to 11.8 pence. Many of Britain's grocers are finding the going tough, despite their focus on essential goods, as consumers cut back on spending due to fears over job security, a squeeze on incomes and government cuts. Bradford, northern England-based Morrisons has been losing market share, hit by competition from discounters Aldi and Lidl as well as its lack of exposure to fast-growing online and convenience store markets. Its share fell to 11.8 percent in the 12 weeks to Feb. 17 from 12.4 percent a year earlier, according to market researcher Kantar Worldpanel. In a bid to reverse this, Morrisons has also stepped-up its investment in convenience stores. It said its first 12 "M local" stores were performing well and it has recently acquired 62 sites from the administrators of Jessops, HMV and Blockbuster. It is targeting 100 stores by the end of the year. The firm is also revamping its traditional store estate. Philips has said Morrisons needs to do a better job of telling customers how its products and service beat those of other supermarkets, in particular by pointing out its more than 5,000 trained butchers, bakers and fishmongers, and needs to make its promotions stand out. Morrisons plans to invest about 1.1 billion pounds in the 2013-14 year, up from 1 billion pounds in 2012-13. The investment in new business channels has meant a further scaling back of the 2013-14 target for new traditional supermarket space to 0.5 million square feet from 0.9 million sq ft. ($1 = 0.6700 British pounds) (Additional reporting by Rhys Jones,; Editing by Kate Holton and Mark Potter) Link this Share this Digg this Email Reprints

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