When the affable Dutchman took the helm last September, the UK’s fourth biggest supermarket was celebrating strong like-for-like growth having well and truly put the travails of its Safeway acquisition behind it. The party lasted well into the early part of this year, but since spring the mood music at Morrisons has been more subdued.
According to TNS Worldpanel data for the 12 weeks to August 12, Morrisons sales growth of 2 per cent trails Sainsbury’s 4 per cent, Tesco’s 4 per cent and Asda’s 5 per cent at a time when the big four are engaged in a fierce price war and UK consumers are starting to tighten their purse strings.
Morrisons is still a supermarket powerhouse with profits before tax of£369 million in the year to February 4, but the City will want to see clear evidence that Bolland’s strategic vision for Morrisons can deliver the goods during his second year. After Morrisons chairman Sir Ken Morrison retires next spring, the Bolland-effect at the supermarket is likely to attract greater scrutiny.
Furthermore, Bolland will be hoping that Morrisons’ share price, which has been buoyed for much of this year by speculation about a possible private equity bid, does not suffer if the Qatari-backed Delta Two’s proposed bid for Sainsbury’s collapses.
Of course, Bolland lifted the veil on his initial vision at his eagerly-anticipated strategic review in March. He vowed to spend£450 million on modernising the brand, refurbishing stores, expanding distribution facilities in southern England and upgrading.
Bolland’s overall message was “evolution, not revolution", as he vowed to enhance, rather than replace its Market Street offer. On the product front, his biggest pledge was to step up Morrisons’ focus on quality freshly cooked, organic and healthy food at reasonable prices.
However, some City analysts were disappointed by his review, particularly the absence of a firm commitment to addressing two of its biggest strategic weaknesses; notably, launching an online grocery operation or expanding aggressively into margin-enhancing non-food categories.
In simple terms, if Morrisons is to grab market share from its rivals Bolland will have to pull off the daunting feat of outperforming its rivals on value-for-money quality and healthy food, while protecting its margins. It will be no easy task and time is not on his side, given a resurgent Asda, a bitter price war and the continuing expansion of all the major chains into healthy and organic lines.
Some City analysts are concerned about Morrisons’ performance in the second half of 2007. Shore Capital forecast that the supermarket will have to register like-for-like sales growth of 8 per cent to hit the analyst company’s top-end forecasts, given its recent poor trading.
As his first anniversary approaches, it’s too early to make any judgement about Morrisons’ performance under Bolland’s stewardship, but the amiable Dutchman may find that his second-year in charge – in a tightening retail economy - more challenging. Time to show your mettle, Mr Bolland.