Morrisons boosted its current forecast for profits on Thursday following new plans to expand its business that included the agreement to provide food to online retailer, Amazon. Morrisons is the smallest among the four major supermarket stores in Britain.
According to the group, which is headquartered in Bradford, it revealed that it predicts to earn further income of between 50-100 million pounds in the mid-term from its online business and others along with lower interest rates.
One week ago, the company took many by surprise when they announced a supply agreement with Amazon supported by the online seller of grocery products, Ocado in which they will help grow Morrisons.com.
It is set to be a positive year for the dominant supermarkets in Britain which have been hit by constant in pricing wars and have faced intense competition from budget supermarkets, Aldi and Lidl.
The dominant group of supermarkets in the UK are closing in on the price gap created by the German rivals through better consumer services and product availability, coupled with efforts to ensure that they are emphasising their product ranges and their online services.
Over the last quarter Morissons has seen an improvement in the share price, up by 41 per cent having been catalysed by stronger trading and the agreement entered into with Amazon. Very recently the company made a comeback in the FTSE 100 on the London Stock Exchange after a brief disappearance.
The grocer intends to make available large amounts of its fresh and frozen products to consumers in the UK through Amazon. According to the speculations of analysts the project is likely to include the whole array of services offered by Morrisons over time.
The chief executive of the company, David Potts told interviewers:
“In terms of whether it can grow to be a bigger business, I think in the end that’s down to customers and down to the execution in the broader supply chain on both sides… Our belief is it will be advantageous to stakeholders in Morrisons.”
Potts is an ex-Tesco executive who moved over to Morrisions in 2015 and he made these comments following the announcement that the company had forecast a 27 per cent drop in full-year profit.
The grocer, together with its main competitors; Tesco, Sainsbury’s and Asda, are slashing item costs in a bid to slow the loss of customers who prefer to now shop at the German rivals.
Morrisons stated that their pre-tax profits total 302 million pounds year ending Jan 31, a drop from the previous figure registered of 413 million pounds in the 2014-15 period. This marks a continuous nine year underperformance and four years of overall decline.