Our year

Financial highlights

£17.7Bn

Turnover down 2%

(2012/13: £18.1Bn)

2.8%

Like-for-like sales down

(Ex-fuel Ex-vat)

(2012/13: 2.1%)

£785m

Underlying profit before tax

(2012/13: £901m)

£903m

Non-recurring exceptional costs

£(176)m

Loss before tax

(2012/13: profit of £879m)

(10.2)p

Earnings per share

(2012/13: 26.7p)

25.2p

Underlying earnings per share down 8%

(2012/13: 27.3p)

9.16p

Final dividend

13.0p

Total dividend for the year up 10%

(2012/13: 11.8p)

£2,817m

Closing net debt

(2012/13: £2,181m)

£1,086m

Capital investment

(2012/13: £1,016m)

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Our business

THIS IS MORRISONS

Morrisons has grown from a market stall in Bradford to the UK’s
fourth largest supermarket group.

Key

  • Distribution centres
  • Manufacturing
  • Morrisons M local
  • Supermarkets

Manufacturing facilities

We process 40% of the fish we sell in store at our Grimsby site.

Online

Our online delivery service now covers two areas of the UK, we will cover 50% of UK households by the end of 2014.

Fresh

Our vertically integrated supply chain and strong supplier relationships ensures only the freshest produce is sold in our stores.

11.8m

customers visit stores per week

59%

of the fresh food that we sell, we make ourselves

75,000

online deliveries between 10 January and 9 March 2014

605

stores across UK, of which 102 are convenience stores

125,000

number of colleagues

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Our Business

What we do

We are the only leading UK grocer that can claim a business model
that is involved from field to fork.

How we create value

How we are different

  • Fresh

    From field to fork in hours

    Controlling food provenance, safety and quality.

    Monitoring to our standards

    Through our Ethical Trading Code and Manufacturing Standard.

    Prepared by us

    Making more fresh food than any other supermarket.

    Efficiencies through our operation

    Getting food onto our shelves fresher and faster.

  • Value

    Passing savings on to the customer

    Our vertical integration model allows us to take cost out of the supply chain to pass on to customers.

    Honest, clear pricing

    Transparent promotions and clear shelf edge pricing giving our customers flexibility.

    Quality

    If a customer is not 100% satisfied, neither are we. We offer refunds and replacements on products prepared by us.

    Reducing our waste

    Buying whole animals and crops direct from farmers and processing through our own operations eliminates needless waste.

  • Service

    Hello, Offer, Thank (HOT) service

    HOT customer service provides enhanced perception, engagement and loyalty.

    Skilled colleagues

    Investing in our colleagues allows us to deliver excellent customer service, providing continuous development and improvement.

    Innovation

    Our multi-channel, multi-format offer is tailored to give a unique customer experience, reinforcing our fresh credentials.

    Availability

    In store, our operation allows us to react quickly and efficiently to customer needs, catering for local demand.

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Our business

The market context

Challenging conditions

The market Less

Challenging conditions

Over the past year, the grocery market1 and its consumers have continued to face challenging economic conditions. Many customers have been constrained financially and have had to choose carefully which store to shop at, which products to buy and in what quantity.

Customers remain cautious about the future, which adds to the necessity to limit their current spend. This has resulted in growth slowing from 4% over the first half of our financial year to 2.9% in the fourth quarter. We expect customers to feel pressure on their real income for some time.

1Kantar

Market growth

Within the market, the discounters are now taking a bigger proportion of sales, driving much of the growth. On average they drove over a third of total market growth through the year.

The market has been working hard to counter this threat, with particular emphasis on couponing activity, which some of our major competitors are able to tailor to targeted consumer groups. We believe that personalised couponing will continue to feature in the marketplace and will launch a Morrisons card during the coming year.

GROCERY MARKET SALES GROWTH 2013

MARKET GROWTH DRIVEN BY

Customer sentiment More

Consumer confidence index

Consumer confidence started 2013 at a relatively low point but improved through the year. In January 2014 46% of consumers were expecting to cut down on eating out and 31% on holidays, which compares to 53% and 38% a year earlier. However the trend has not been reflected in food shopping where the proportion that expects to cut back has remained at around 23%. Although overall consumer confidence improved, there wasn’t such a marked improvement in how people viewed their personal financial situation, implying that any recovery in market growth is likely to remain fragile.

Inflation and earnings

Despite improved confidence in the economy and a fall in the rate of unemployment, falling real incomes remained a drag on personal finances and the growth of consumer spending. Inflation continued to outstrip earnings growth during the year, as it has done for the past four years. Households therefore continued to be worse off. Inflation has also been the main driver in market growth as total volume continued to be flat to negative. In January 2014 we launched a campaign to nail down prices to help ease the pressure on customers’ spending.

CUSTOMER CONFIDENCE

INFLATION VS EARNINGS

Shopper trends More

Value

Consumers continue to look for ways to manage their outgoings and adapt their lifestyles. Value for money continues to be of increasing importance. Whilst price is a key factor when assessing value, quality has also risen up the consumer agenda this year following the horsemeat scandal that affected many of our competitors.

Customers state that they are willing to pay more for quality assurance standards and locally produced items. No horsemeat was found in Morrisons manufactured products and our vertically integrated supply chain means we can give customers confidence in our produce.

MOST IMPORTANT DRIVER OF PRODUCT CHOICE

WILLINGNESS TO PAY EXTRA FOR...
 

Multi-channel and technologyMore

Online

Technology is becoming more and more important in all elements of customers’ lives, and continues to grow in importance to retail. Consequently, online sales continue to increase rapidly; by the end of 2014, the value spent in the online grocery market is expected to grow to £7.7bn, up 18% on 20131. This is an opportunity in which we can now share, following the launch of our online offer in January 2014.

As well as being able to shop online, shoppers’ interest is also increasing in digital tools that help them to compare prices and promotions.

Convenience

Multi-channel shopping has become the new norm for the majority. Shopping around across channels and stores allows customers greater flexibility in managing their spend. Consumers are shopping around more frequently, adopting a ‘little and often’ approach.

The convenience channel continues to benefit from this, and is another big growth area with the convenience market expected to be worth £37.7bn by the end of 2014, a growth of 6%1. It’s an area we are rapidly expanding into.

* Percentage of people who compare prices/promotions online before purchasing

1 IGD UK channel forecast 2013-18

USE OF ON THE SPOT PRICE COMPARERS*

CHANNEL SALES GROWTH 2013 - 2018

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Our strategy

Save, invest, grow

Strategic objectives

What we did

What we will do next

1

Save

  • Increasing efficiency
  • Driving savings in indirect procurement
  • In-store productivity
  • Revamping our systems
  • Accelerating our future opportunities

£138m

Delivered in efficiency savings across retail supply chain and manufacturing through goods not for resale, IT and store productivity beating £300m three-year target

2.8m

Store hours saved

90%

Rolled out supply chain forecasting to 90% of our ambient suppliers

  • Complete the roll out of IT systems in our store support and buying teams.
  • Continue to drive efficiency throughout our end to end operations.
  • Leverage our vertical integration further.
  • Deliver further savings in indirect procurement and losses.

2

Invest

  • Getting closer to our customers
  • Investing in our core proposition
  • Colleague engagement

117

Rolled out Fresh Format to 100 existing and 17 new stores

10,000

Own brand products launched since the start of the programme

93%

Participation in colleague engagement survey

214

Launched our Nutmeg clothing range in 214 stores

  • Invest more in value, particularly in fresh.
  • Improve our own brand offer through sourcing and supply review.
  • Trial targeted and personalised communication and launch a Morrisons card.
  • Open 350,000 square feet of new store space.

3

Grow

  • Accelerating our presence in new channels

102

Now trading 102 convenience stores; 50% in the South

2

Opened two dedicated distribution centres to support convenience

500,000

Serving over 500,000 customers in M local stores every week

Launched our food online proposition

80,000

Over 80,000 registered customers in Yorkshire and Warwickshire

100

Vans delivering daily in Yorkshire and Warwickshire

  • Expand our online food proposition, reaching 50% of UK households by the end of the year.
  • Open up to 100 M local stores.

Stories behind what matters

We do More of what matters

What's next

Our vision is to be a multi-format, multi-channel grocer.

A clear offer

We aim to carve out a clear position as a value-led grocer focused on fresh food, with friendly service.

Growing locally

This year, we celebrated the opening of our 100th M local store. 50% of our M local stores are in the South.

On your doorstep

Our online servicer is already covering 20% of UK households

Building on our strengths

Over 50% of sales in our M local stores are from fresh and chilled products.

Expert advice

Our fishmongers are on hand to offer advice and prepare fish to customer specification.

Award-winning

The quality of our seafood was recognised in the year at the 2013 Retail Industry Awards: we won Seafood Retailer Of The Year.

Own brand relaunch

Since the start of the programme we have launched 10,000 own brand products.

Hiring apprentices

Our apprenticeship programme is vital in transforming our colleagues into skilled butchers, bakers and fishmongers.

Caring for our colleagues

In 2013, for the fourth consecutive year we won the Grocer Gold “Employer of the year” award.

Satisfaction guaranteed

We are so confident in our Market Street produce we offer a 100% satisfaction guarantee.