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Morrisons to sell groceries online

Thursday, March 14 12:12:33

Britain's Wm Morrison Supermarkets plans to launch an online food business within a year, possibly with the help of specialist Ocado, as it battles to catch up with rivals after posting its first profit fall for six years.

Britain's fourth-biggest grocer has held back from the fast-growing online grocery market because of doubts over its profitability. Ocado has yet to make a pretax profit in around ten years of business.

But analysts have blamed Morrisons' absence online, as well as its late entry into the convenience stores market, for its recent sales underperformance. Rivals like market leader Tesco and number three J Sainsbury say their online customers tend to be their most loyal, shopping in stores as well as on the web.

"In an online world, Morrisons isn't online, and that says it all," said Phil Dorrell, director of retail consultants, Retail Remedy.

Britain's online food market is currently growing at around 16 percent, and is set to almost double in value over the next five years to 11 billion pounds ($16 billion), Morrisons said.

The group said on Thursday it would launch an online grocery business by January 2014. Details were sketchy, but the firm said it could involve tapping the technology, capacity and operating expertise of Ocado.

The two companies said they were in talks, but that discussions did not involve Morrisons buying all or part of Ocado and that they would not affect Ocado's existing deal with upmarket grocer Waitrose, which provides many of its products.

"This is one of the options open to us and our decision to enter the market is not dependent on the outcome of these discussions," Morrisons Chief Executive Dalton Philips said.

Shares in Morrisons, down 10 percent over the last year, were up 1.1 percent at 274.5 pence by 1000 GMT. Shares in Ocado, which also reported a 14.4 percent rise in sales for the 12 weeks to Feb. 24, jumped over 20 percent.

"Much needs to be done, but at least Morrison has joined the party," said Panmure Gordon analyst Philip Dorgan. Reuters