Morrisons (LSE:MRW) are part of ‘the big four’ supermarkets that includes Asda, Tesco, and Sainsbury’s. Morrisons has traditionally been seen as a lower-cost supermarket compared to its contemporaries. Over the years the big four have often attempted to outwit, outprice, and outbattle the others to rise atop a supermarket war.
Humble beginnings and rise to prominence
Founded in 1899 by William Morrison (hence the name WM Morrisons) the business started off as an egg and butter merchant in a humble market setting in Bradford, England. The firm’s rise to prominence started in 1952, when William’s son Ken took over the company. He oversaw a small store opening in Bradford city centre in 1958. The first supermarket arrived in 1961. In 1967 the company became publicly traded and listed on the London Stock Exchange.
Up until 2004 Morrisons’s presence in the UK was very much in the North of England, when the acquisition of Safeway offered Morrisons the opportunity to expand its reach to the south of England, Scotland, and Wales. Safeway was purchased for £3.3bn.
The now-defunct chain had amassed 479 stores and the operation undertaken by Morrisons to convert chosen stores was one of the biggest in British retail history. Morrisons converted 50 carefully chosen stores and sold off many others. As of 2019, Morrisons employs 110,000 people and services 11m customers a week.
Performance and competition
Morrisons has reported a drop in group like-for-like sales after trading conditions remained “challenging” thanks to consumer uncertainty. For the 22 weeks to 5 January, sales (excluding fuel) dropped 1.7%. Morrisons said the fuel market was “highly competitive”, with group like-for-like sales including fuel down by 2.8%.
The big four all saw a drop in market share this month according to the latest data from Kantar. Tesco’s market share dropped to 27.3% from 27.7% a year earlier, Sainsbury’s to 15.8% from 15.9%, Asda to 14.9% from 15.3%, and Morrisons fell to 10.3% from 10.6%.
The Morrisons share price in the last 12 months alone has seen a decrease of 22% at the time of publication.
What happens now?
As I mentioned before, the battle rages on with the emergence of new players trying and, it looks like, succeeding in gaining market share from the big boys. Morrisons has reacted by announcing a major shake-up and restructure. The supermarket announced it will create 7,000 new jobs while axing 3,000 managerial roles. The emphasis will be on creating more customer-facing roles such as bakers, butchers, and fishmongers.
A study compiled by Which? recently named Sainsbury’s the cheapest supermarket of 2019 which means Morrisons cannot even hold onto that title.
I envisage further tough times and uncertainty ahead for this supermarket and expect that its market share will continue to dwindle. The share price will most definitely be affected.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.