It was finally open house at Morrisons as the retailer threw open the doors of a flagship conversion and talked in detail for the first time about how the programme is progressing.
Liz Hamson reports
Ever since Morrisons took over Safeway, it has remained resolutely tight-lipped about progress. But earlier this week, the silent treatment ended as joint MDs Bob Stott and Marie Melnyk invited the press over to the recently re-opened flagship megastore in Milton Keynes two months after the company’s first profit warning to tell them that, despite the mammoth task of integrating a business three times its size, the conversion programme was going well.
By next Thursday, 26 stores will boast the distinctive black and yellow livery. The Milton Keynes store, which cost over £2m to convert, was completed in the four-day deadline the company set for each store.
The pace of conversion was always going to be important and Morrisons has no intention of letting up on the frenetic three-a-week schedule, said Stott. “Three a week is a hell of a task, but so far so good. We’ve had a blip in year one but we see the other three years running through as per plan.”
The conversion programme has been hard work for the 120-strong team involved, he conceded, not least because of the state they found the Safeway stores in. “Bits had been neglected, for example refrigerator maintenance. Generally we have been spending a couple of hundred thousand pounds a store getting the maintenance to a standard we’re happy with.”
Although the average cost per refit was £1.5m, 50% more than originally forecast, Stott said he expected the figure to “come down a bit” and insisted that the capital expenditure would not exceed the allocated £525m budget. “The cost of the Milton Keynes store was within the total store budget for the year as a mix of capex and revenue cost,” he said. “We’re confident that the store conversions will be within budget.”
Of the uncoverted stores, he said: “We have recouped volumes enough to pay for the price cuts. We are certainly looking to move that on.” He reiterated the company’s intention to generate a 25% sales uplift in all stores over 15,000 sq ft.
There have also been developments in the disposal of 120 smaller stores, he said. “We’ve got people who want one or two, some who want 40 or 50 and there are parties looking at the whole lot, VCs primarily, because they wouldn’t have a problem with the OFT.”
Stott wouldn’t be drawn on the bidders’ identities, but said that former Safeway chief executive, Carlos Criado-Perez, was not involved. He also rubbished the speculative £650m-£700m price tag put on the disposals by some media commentators. He said: “We’re looking at the whole process and seeing which would offer the best value. We’re reasonably well through.” Current trading levels at the stores were “OK”, he added.
September 8 marked the deadline for the 52 stores Morrisons was told by the Competition Commission to sell as part of the takeover. So far it has sold 14 to Waitrose, 14 to Sainsbury, one to West Midlands Co-op and 18 are now in solicitors’ hands, confirmed Stott. Of the remaining five, one will go out to offer and the other four, having failed to attract offers from one-stop shop operators or discounters, will be put out to offer to non-food operators. If that fails, Morrisons will discuss with the OFT whether to keep or close them.
In the meantime, Morrisons is pushing ahead integrating its product ranges, supply chain and operational systems. By the end of autumn, it expects to have harmonised Safeway’s and Morrisons’ ranges into a single 22,000-line catalogue. Melnyk said: “We have really hit harmonisation hard in anticipation of having one corporate catalogue by the end of autumn for the Christmas trading period.”
Around 1,500 lines that had been exclusive to Safeway have been kept. Several thousand have been shed, including almost the entire non-food offer. However, Morrisons has cherry-picked the best of the Safeway offer, keeping 60 of Safeway’s top end wines and expanding the range of Safeway’s premium ready meal ranges, The Best and Eat Smart, which have been subsumed into the Morrisons brand.
Home and leisure will also be a strong focus this autumn, said Melnyk, though there are no plans to increase the average 10% floorspace devoted to non-food. “It’s all about non-food complementing grocery not dominating it,” she said, adding that the last few months have been spent running down Safeway’s legacy stock, including the infamous 50,000 pairs of Levis.
The Safeway brand should have disappeared by next spring, she said.
Morrisons is hoping to achieve £215m synergies from the integration and has already driven out significant business costs, said Stott. Although it has embarked on a recruitment drive to bolster its head office personnel at its new head office facilities in Bradford - the buying and trading team were relocated to temporary accommodation this week - of the original 1,500 Safeway head office staff at Hayes, 800 have now left or given notice.
“The other big area where we’re going to take cost out is by re-engineering our warehouses,” said Stott.
Morrisons’ newest regional distribution centre, in Swan Valley, Rugby, is handling many of the deliveries previously made from the chain’s two other main depots in Warrington, Cheshire, and Wakefield, Yorkshire. A new fresh produce packhouse in Thrapston, acquired from The Greenery in May, is also up and running and major developments of its Farmers Boy facilities in Bradford are underway, said Melnyk, adding that Morrisons also has planning consent for an RDC in Kettering and will consider redeploying Swan Valley as a national warehouse for wine and spirits if it comes on stream. There are also plans to extend the chain’s fresh meat facilities, she added.
Morrisons has invested heavily to make sure that everyone enjoys the change. The Milton Keynes store now employs 600 staff - compared to 374 under Safeway.
There’s no doubt that the Market Street format was going down well with money-conscious customers. One pensioner said: “We like the store better than Safeway. It’s excellent value for money.”
But for all Melnyk’s protestations that the offer is inclusive - “for people who have money to spend and if they’re on a budget we can cater to that to” - there remain questionmarks over whether its tried and tested, but very northern, formula will win over the well-heeled southern customer.
Liz Hamson reports
Ever since Morrisons took over Safeway, it has remained resolutely tight-lipped about progress. But earlier this week, the silent treatment ended as joint MDs Bob Stott and Marie Melnyk invited the press over to the recently re-opened flagship megastore in Milton Keynes two months after the company’s first profit warning to tell them that, despite the mammoth task of integrating a business three times its size, the conversion programme was going well.
By next Thursday, 26 stores will boast the distinctive black and yellow livery. The Milton Keynes store, which cost over £2m to convert, was completed in the four-day deadline the company set for each store.
The pace of conversion was always going to be important and Morrisons has no intention of letting up on the frenetic three-a-week schedule, said Stott. “Three a week is a hell of a task, but so far so good. We’ve had a blip in year one but we see the other three years running through as per plan.”
The conversion programme has been hard work for the 120-strong team involved, he conceded, not least because of the state they found the Safeway stores in. “Bits had been neglected, for example refrigerator maintenance. Generally we have been spending a couple of hundred thousand pounds a store getting the maintenance to a standard we’re happy with.”
Although the average cost per refit was £1.5m, 50% more than originally forecast, Stott said he expected the figure to “come down a bit” and insisted that the capital expenditure would not exceed the allocated £525m budget. “The cost of the Milton Keynes store was within the total store budget for the year as a mix of capex and revenue cost,” he said. “We’re confident that the store conversions will be within budget.”
Of the uncoverted stores, he said: “We have recouped volumes enough to pay for the price cuts. We are certainly looking to move that on.” He reiterated the company’s intention to generate a 25% sales uplift in all stores over 15,000 sq ft.
There have also been developments in the disposal of 120 smaller stores, he said. “We’ve got people who want one or two, some who want 40 or 50 and there are parties looking at the whole lot, VCs primarily, because they wouldn’t have a problem with the OFT.”
Stott wouldn’t be drawn on the bidders’ identities, but said that former Safeway chief executive, Carlos Criado-Perez, was not involved. He also rubbished the speculative £650m-£700m price tag put on the disposals by some media commentators. He said: “We’re looking at the whole process and seeing which would offer the best value. We’re reasonably well through.” Current trading levels at the stores were “OK”, he added.
September 8 marked the deadline for the 52 stores Morrisons was told by the Competition Commission to sell as part of the takeover. So far it has sold 14 to Waitrose, 14 to Sainsbury, one to West Midlands Co-op and 18 are now in solicitors’ hands, confirmed Stott. Of the remaining five, one will go out to offer and the other four, having failed to attract offers from one-stop shop operators or discounters, will be put out to offer to non-food operators. If that fails, Morrisons will discuss with the OFT whether to keep or close them.
In the meantime, Morrisons is pushing ahead integrating its product ranges, supply chain and operational systems. By the end of autumn, it expects to have harmonised Safeway’s and Morrisons’ ranges into a single 22,000-line catalogue. Melnyk said: “We have really hit harmonisation hard in anticipation of having one corporate catalogue by the end of autumn for the Christmas trading period.”
Around 1,500 lines that had been exclusive to Safeway have been kept. Several thousand have been shed, including almost the entire non-food offer. However, Morrisons has cherry-picked the best of the Safeway offer, keeping 60 of Safeway’s top end wines and expanding the range of Safeway’s premium ready meal ranges, The Best and Eat Smart, which have been subsumed into the Morrisons brand.
Home and leisure will also be a strong focus this autumn, said Melnyk, though there are no plans to increase the average 10% floorspace devoted to non-food. “It’s all about non-food complementing grocery not dominating it,” she said, adding that the last few months have been spent running down Safeway’s legacy stock, including the infamous 50,000 pairs of Levis.
The Safeway brand should have disappeared by next spring, she said.
Morrisons is hoping to achieve £215m synergies from the integration and has already driven out significant business costs, said Stott. Although it has embarked on a recruitment drive to bolster its head office personnel at its new head office facilities in Bradford - the buying and trading team were relocated to temporary accommodation this week - of the original 1,500 Safeway head office staff at Hayes, 800 have now left or given notice.
“The other big area where we’re going to take cost out is by re-engineering our warehouses,” said Stott.
Morrisons’ newest regional distribution centre, in Swan Valley, Rugby, is handling many of the deliveries previously made from the chain’s two other main depots in Warrington, Cheshire, and Wakefield, Yorkshire. A new fresh produce packhouse in Thrapston, acquired from The Greenery in May, is also up and running and major developments of its Farmers Boy facilities in Bradford are underway, said Melnyk, adding that Morrisons also has planning consent for an RDC in Kettering and will consider redeploying Swan Valley as a national warehouse for wine and spirits if it comes on stream. There are also plans to extend the chain’s fresh meat facilities, she added.
Morrisons has invested heavily to make sure that everyone enjoys the change. The Milton Keynes store now employs 600 staff - compared to 374 under Safeway.
There’s no doubt that the Market Street format was going down well with money-conscious customers. One pensioner said: “We like the store better than Safeway. It’s excellent value for money.”
But for all Melnyk’s protestations that the offer is inclusive - “for people who have money to spend and if they’re on a budget we can cater to that to” - there remain questionmarks over whether its tried and tested, but very northern, formula will win over the well-heeled southern customer.
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