Dalton’s got scope to experiment

Dalton Philips has lots of scope here. He’s signalled his intent to reduce costs with the efficiency trial, ILP and other labour saving devices in stores and the ‘labs’ concept to challenge ranging, efficiency and presentation thinking.

I find it great that Morrisons has so much scope, they made £850m last year and are on target at half year to at least match that – selling 90-95% food – 5% non food and services like dry cleaning. Our blog continues to track these changes.

Compare that to Tesco and Asda even Sainsbury’s who have non food as a much larger mix as more non food brings in the profitability where Tesco, Asda, Sainsbury simply cannot compete on the food margins fuelled by Morrisons factories.

There is no convenience estate – JS has a significant one fuelled by acquisitions, same with Tesco who continue to open their expresses aggressively. Asda have said they wont go into convenience as you have to charge more, price conscious Asda sensitive to their value credentials won’t jeopardise that for an extra 5p on a pint of milk.
It’s clear to me that they will be bidding keenly on the Netto divestment (OFT announced 47 stores that Asda have to shed before ratification) with the competition having extensive convenience chains, the path will be virtually clear for Morrisons to pick up these smaller stores with little issue.

Similarly there is no online presence, critically speaking it’s been a stroke of genius waiting, technology is far ahead of where it was 10 years ago, Tesco and JS have battled to make online profitable, Asda have picked in stores but have started moving to online fulfilment centres which are efficient but suffer with availability problems if the tales are to be believed. Then there is Ocado who felt they were worth £1 billion upon their stock market launch 2 months ago despite never turning a profit. ever.

Their shares are now at £1.38 against an opening expectation of £3, when Dalton discussed further acquisitions, did he meant further plants and production facilities or did he mean Ocado? It would give Morrisons a presence in the areas they are under represented (South / South East) and infrastructure to allow delivery and picking in the purpose built warehouses rather than stores.

Marc Bolland famously rejected a move to online as ‘i’m not sure you can sell meat and fish online’ but there is nothing to say that within the Ocado facility you can’t have a butcher and fishmonger producing custom cuts of fish along with the pre packed variety that are cut on the day and sold by weight so the market street experience lives on within what is effectively a depot.

Who knows? Dalton may change this.

There is plenty of scope within Morrisons for Dalton to work with, they make a healthy profit and have a healthy balance sheet without yet moving into the more profitable areas of retail, compare that to likes of JS who still struggle with margin challenges despite several in store restructures, board changes, depot closures and range changes.

Morrisons and Dalton have the scope and potential to make more profit very easily with moves into online, convenience and more non food, this is without an attack on the bloated in store structure with department managers, assistant managers, enhanced rate supervisors and supervisors.

There are savings to be realised with the in-store structure if they decide to go down that route, a route that Asda, JS and Tesco have trodden down several times with their in-store structures.