It's all been kicking off at Morrisons

It’s always tempting to imagine what might have been. Sir Terry Leahy once reflected on the role fate played in delivering him from The Co-op (where he started out as a grad). So, what might have happened had, say, Andy Bond, been recruited to run Morrisons three years ago, as opposed to Dalton Philips? Would it be in the same pickle it’s in? Would he have introduced the Store of the Future, and attempted to take Morrisons upmarket? How would he have responded to the threat of the discounters? Would he have bought Iceland, developing a second discounter string to the Morrisons bow, while being able to buy better? Would he have signed up with Ocado? And on the same terms? Would he have gone into convenience? And taken on Blockbusters stores (all in second-rate locations) to do so?

“It’s all been kicking off at Morrisons this week, and not just at its two-day Kickoff Conference”

Adam Leyland, Editor

But perhaps the time is now right to consider not what might have been, but what might be? With its share price having fallen by 20% since Dalton Philips took over almost four years ago; with sales down 6.5% over Christmas, and 4% down in the latest four-week Kantar report; and with extra online sales dwarfed by the loss in store sales in the past year, Philips is asking for more time. But while he and his team promised to deliver “the growth ticket” at this week’s two-day Kickoff Conference for store managers and suppliers, how much time he can borrow (or beg, or steal), remains to be seen. He’s certainly under huge pressure – as will be his chairman, Ian Gibson, after the three-week roadshow that follows its results in early March – to show some measure of convergence with its rivals, as patience in the City wears increasingly thin.

In fact, it’s already kicking off – and not just at the ‘Kickoff Conference’, with Bloomberg reporting that the Morrison family were exploring opportunities with private equity backers to buy back the business.

Regardless of the veracity of this particular story (Sir Ken denied it), a number of private equity players are running the slide rule over Morrisons. Some of my sources think it is too far gone, or that structural change is insurmountable. Others believe they may be able to make the numbers work, disposing of unprofitable stores, cutting costs/staff, restructuring the property portfolio.

One thing is for sure: though this is a distressed business, and the City sees value, its sheer size is causing anxiety. With a price tag (including share premium, debt and pension) of at least £11bn, it would be the biggest acquisition since Lehman crashed. So if Morrisons were to be acquired, you would need a huge degree of confidence in the executability of what you wanted to do?

Could it be done? Can it be turned around? Well, the old Safeway business in 2005 was showing -10% LFL. So it’s possible. But as big a question as the ‘how?’ is the ‘who?’ Who can do it? And if it’s not Philips, who would want it?

Well, Andy Bond is available, and lives 15 miles from Bradford. And he would find 60 people who used to work at Asda to welcome the still popular ex-CEO. And there are others out there with a clean pair of heels: David Potts from Tesco. And one wonders if the likes of Richard Pennycook or Richard Hodgson might be tempted back with the right offer. It’s just a thought.