Specialist
Former Director at WM Morrison Supermarkets plc
Agenda
- Challenges to retail like-for-like growth, including pricing pressure in the UK, and Morrison’s (LON: MRW) positioning vs Tesco (LON: TSCO), Sainsbury’s (LON: SBRY), Asda (NYSE: WMT) and the discounters, Aldi and Lidl
- Morrison’s daily growth opportunity and impact on top and bottom line
- Benefits of manufacturing capabilities
- Real estate strategy in 2020
Questions
1.
Could you outline supply-side constraints on the big four supermarkets due to the novel coronavirus pandemic? How long might it take for supply to catch up with demand?
2.
Morrisons’ most recent figures reported mid-teen like-for-like growth, with that set to continue week on week, at least until demand tapers off. Do you think this growth pattern is specific to Morrisons, and indicates the company is taking share? Is it market-wide?
3.
Would you say players such as Tesco – which has a much larger presence than Morrisons – would benefit most from shoppers choosing supermarkets in closer proximity to their homes?
4.
Do you predict no significant market share swings in UK food retail despite increased demand?
5.
How easy would you say it is for supermarkets to shift inventory allocations at short notice so more stock goes to larger stores rather than convenience stores?
6.
I believe Morrisons has spoken about short-term range edits in response to increased demand and supply- chain constraints. What sort of range edits should we expect?
7.
My understanding is that Morrisons defines small suppliers as having GBP 100,000-1m in revenues. How could the company’s introduction of immediate payment help small suppliers’ liquidity? Would it be beneficial?
8.
Do you think small suppliers could go bust and impact medium- to long-term food availability?
9.
What percentage of Morrisons’ goods come from small suppliers?
10.
Do you think Morrisons’ integrated structure is an advantage in a scenario such as that caused by the coronavirus?
11.
Could you estimate how much of Morrisons’ supply comes from the Farmers Boy factory in Bradford? It would help with understanding the extent of disruption were it shut down.
12.
Would you say Morrisons’ integrated model has a neutral impact in regarding the coronavirus, apart from the key risk around the Farmers Boy factory?
13.
Do you think there could be issues around cross-border movement and access to goods?
14.
How could cross-border issues impact supermarket gross margins? Are we experiencing cost inflation around raw materials, manufacturing or products?
15.
Do you predict downward pressure on operating margins as labour and distribution costs increase?
16.
What are your expectations for labour inflation?
17.
Do you think Morrisons can absorb a 3-4% impact on operating costs?
18.
Do you think supermarkets will implement blanket price increases? Would increases be on specific goods?
19.
Do you know if staffing levels are dropping? If so, is this likely to escalate?
20.
Do you think consumers would buy into home-butchering their meat? As you said, it would be a fairly large behaviour shift.
21.
Do you think Morrisons or any other of the big four could receive state aid to cover increases in labour costs, sick pay or overtime?
22.
The business rate holiday announced by the UK government seems like a potential tailwind for food retailers, and particularly the grocery market. Could you estimate business rates for Morrisons and the big four? What impact could the holiday have?
23.
What do you think is driving Morrisons’ relatively poor performance – as it displayed in 2019, notwithstanding a potential uptick at the end of the year – excluding the impact of the coronavirus?
24.
Could you outline Morrisons’ price positioning for an average basket, compared to Aldi, Lidl, B&M or Home Bargains?
25.
I know Tesco has a renewed focus on price to try and take share back from Aldi and Lidl. Do you think increased pricing aggressiveness from Tesco could further pressure Morrisons?
26.
To clarify, do you think Morrisons’ pricing has shifted closer to Tesco’s and Sainsbury’s to try to hit its fairly aggressive EBIT targets?
27.
I believe Morrisons is evaluating its pricing strategy, and that we are likely to notice pricing adjustments. What scale of price adjustments do you think the company needs to commit to? How much progress has been made?
28.
I think there is concern that pricing adjustments will lead to margin pressure. Do you think there is scope for Morrisons to reduce costs to offset such pressure?
29.
Where could discounter market share plateau in UK food retail?
30.
Could B&M and Home Bargains take substantial share from the big four, despite not offering a full range of items?
31.
What would you say is driving customers towards stores such as B&M and Home Bargains for food purchases as opposed to a big-four retailer such as Morrisons?
32.
What are your predictions for the success of the rebranding of McColl’s stores under the Morrisons Daily name? Could you comment on the scope of the programme, given the remaining sites that could potentially be transformed?
33.
Why do you think the convenience model has historically been unsuccessful for Morrisons?
34.
Do you think it makes more sense for Morrisons to brand its convenience offering as Morrisons Daily rather than McColl’s? Could this be margin dilutive?
