So the City rumour mill was right – sort of.
Morrisons was looking to get its hands on an online retailer after all – just not Ocado, much to the disappointment of many speculative shareholders in the posh food retailer. Instead Bradford’s finest has snapped up baby product retailer Kiddicare in a deal worth £70m.
The supermarket’s boss, Dalton Philips, claims the move should not be viewed as a step toward developing Morrisons’ online grocery ambitions. Perhaps. But the deal still marks a step-change for the supermarket’s strategy.
Firstly, it has bought a well-regarded business that both Philips and FD Richard Pennycook stress is “profitable”, having earned £3m before tax in the past year. Morrisons is also getting its hands on a tried and tested e-commerce platform it believes is scalable to support a large non-food operation.
Morrisons has undeniably lagged its supermarket rivals outside core grocery. But its non-food business – which Pennycook says is currently comparable to BHS – should grow quickly in the wake of today’s deal.
Kiddicare’s fulfilment centre in Peterborough could comfortably support a business several times its current size. Morrisons has also bought the surrounding land should it need to expand further.
Philips also argues that he has second-mover advantage, joking that Kiddicare owners Scott and Elaine Weavers-Wright went through the pain of learning online retailing so Morrisons didn’t have to. If he applies the same principle to food, perhaps a move for Ocado really could be on the cards.
But it doesn’t seem likely. Those disgruntled shareholoders should instead be trying to figure out where Philips will pounce next.
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