Specialist
Former Director at Wm Morrison Supermarkets plc
Agenda
- Like-for-like sales within Morrisons (LON: MRW), including coronavirus-driven trends and outlook
- Morrisons' price positioning vs Asda, Tesco (LON: TSCO), Sainsbury's (LON: SBRY) and discounters
- Margin outlook and cost mitigation strategies
- Growth and value-add opportunities within Morrisons
- Potential carve-out and takeover scenarios
Questions
1.
What’s your take on the move for Morrisons by the various PE firms? What do you think are the key drivers for PE firms wanting to take Morrisons private, as well as any other supermarkets?
2.
When we’re discussing unlocking value, there’s obviously the cost side and maybe value-add initiatives to the top end. Could you discuss both these angles and highlight some factors there?
3.
Would you expect some strip-off of Morrisons’ assets during the vertical integration and decisions made on what to keep and what to dispose of?
4.
Are there any points in the vertical integration optimisation process that you think might be a good disposal opportunity for Morrisons or a rationalisation of that key change in the vertical integrations?
5.
What improvement to the bottom line do you think could be achieved just through rationalising, given your familiarity with Morrisons? What margin percentage could improve if this was done in a sensible way?
6.
Does Morrisons run at a higher waste percentage vs players such as Tesco and Sainsbury’s? Waste is another critical KPI for grocery retail and supermarkets. Do you think Morrisons could become the best in class if it works through this rationalisation and removes the fresh food counters you mentioned as well as removing labour?
7.
Are there any other cost opportunities you think could be optimised or potential savings pulled out under new ownership?
8.
Morrisons seems quite heavy in labour vs the other big four. Given labour inflation trends, do you think this is a potential short-term risk that an acquirer or suitor should note and that might impact the company more than it might impact Tesco and Sainsbury’s?
9.
What are your opinions on Morrison’s management, what they’ve done well and perhaps what is lacking? You mentioned a potential need for a refresh. Do you think any potential players might be well-suited to being brought into the Morrisons frame and might help revitalise the company’s strategy?
10.
You mentioned there are some interesting names of potential suitors and candidates in the market, such as former Tesco potentials. Do you think these candidates are available?
11.
You estimated that about 10% of Morrisons’ around 500 stores are loss-making and said you wouldn’t expect the company to sell those off or go into the sale and leaseback opportunity. Do you think the company could expand its store footprint? Might it have reached saturation?
12.
How might Morrisons’ partnership with Amazon evolve if a PE firm buys up Morrisons? Do you think this potential sale could disrupt the company’s Amazon partnership at all?
13.
Has it surprised you that Amazon hasn’t made an approach for Morrisons? Do you think it was ever part of Amazon’s long-term UK-based ambitions?
14.
What’s your overview of Morrisons’ wholesale arm? Is there anywhere a new owner might leverage this into high growth and it could become a substantial part of the Morrisons business?
15.
Might running wholesale and retail operations out of the same warehouses and logistics centres cause any conflict, perhaps preventing one business from excelling as much as it could?
16.
What are your thoughts on Morrisons’ range, given it’s expanding from fresh to non-food to clothing? You mentioned the company has done exceptionally well and has been putting more emphasis into non-food. Do you think there’s still a lot of work to do overall and a lot of optimisation within the weightings to enhance sales per square foot?
17.
How would you expect like-for-likes at Morrisons to trend? Would you note more increase in average basket size? Do you think the company can increase the frequency of shop by bringing more customers in, and may be doing that through its clothing brand?
18.
Do you think the inflation you mentioned coming through could be the core growth driver in like-for-likes? What are your broader market expectations for inflation? How would you expect the discounters and other players to react to inflation coming through?
19.
You mentioned the gap between the discounters and the big four might start closing due to the dynamics we mentioned on the discounters. How would you estimate that gap currently and where does Morrisons sit within it?
20.
Is there any risk of a PE firm taking over Morrisons or another grocery retailer and putting pressure on price that might lead to a price war in the market and further pricing pressure?
21.
What’s your sense of what PE firms are valuing Morrisons at? Do you think GBP 2.54 per share is a realistic price offering for the company, given your knowledge and the group’s value possibility? Might this be on the high or low side?
22.
Would you expect other players such as Sainsbury’s, Tesco or anyone else in the industry to become a potential target?
23.
Are there any risks we haven’t touched on that you think anyone assessing Morrisons should be aware of? Are there any that might not come to play, but we should note?
