The chairman of supermarket chain Morrisons has insisted the supermarket will be able to deliver a “good” Christmas for customers despite supply chain issues.
Andy Higginson stated that he is “unconcerned” about logistical issues with supermarkets supplying products.
He described the issues as “well publicised” and “slightly exaggerated.”
His remarks come just two days after CD&R, a private equity firm based in the United States, won an auction to acquire Morrisons.
Clayton, Dubilier & Rice (CD&R) has just outbid rival suitor Fortress with a £7 billion ($9.5 billion) bid for the UK’s fourth-largest supermarket chain.
Terry Leahy, the former CEO of Tesco and a senior adviser to CD&R, will make a return to the UK grocery sector as a result of the takeover.
Mr. Higginson is expected to step down as Morrisons’ chairman once the deal with CD&R is completed, so Mr. Leahy is expected to take over.
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Morrisons owns a quarter of its suppliers, including fisheries and meat production operations, and Mr Higginson stated that this was one of the reasons the private equity firm was interested in the business.
“Private equity sometimes gets a bad rap,” Mr Higginson said.
He went on to say that private equity is “focused on growth and attempting to grow businesses – it’s how they make returns… and that’s very much the case here.”
The supermarket chain has agreements with 2,700 British farmers who deliver livestock and produce directly to the supermarket chain’s 17 food processing facilities, which supply 493 stores.
“Supply chains in the UK are incredibly efficient, and I’m confident we’ll be able to deliver a fantastic Christmas for customers as we progress,” Mr Higginson added.
“I believe it will be a good Christmas for people, and I believe they will want to treat themselves.”
Rewind to the beginning of the summer, and the supermarket chain Morrisons is a stock market plodder, a company to be invested in for its healthy dividend rather than any expectation of a large increase in share price. It’s a British supermarket, and we all know that the UK grocery market is fiercely competitive, with well-entrenched big players and little chance of rapid growth.
That was the orthodoxy, and the events of the last four months have rendered it somewhat ridiculous. Morrisons’ stock was trading around 180p at the time. On Saturday, a consortium led by private equity won an auction to buy the company for 287p per share. Those fund managers who dismissed Morrison’s prospects and chose not to own the shares lost out on a pound-a-share payout.
What did the City overlook? According to Andy Higginson, Morrison’s outgoing chairman – who, like the company’s other non-executive directors, will leave when the deal is completed – the Square Mile’s fund managers were unable to see the chain’s “inherent strength,” which owns many of its store freeholds, has its own food production assets, and a pension scheme in surplus.
Morrisons was not alone in being undervalued, according to Mr Higginson, who described it as a “sector problem.” The notion that supermarkets in general are underserved by the City raises the intriguing possibility that other chains will be courted by private investor groups.
Last month, the supermarket warned that a shortage of lorry drivers in the UK would cause prices to rise this year. It stated that a lack of drivers, combined with higher freight charges and commodity prices, could result in higher prices.
It did, however, state that it would work to mitigate those and other potential cost increases, such as those incurred in maintaining good product availability.
Morrisons was founded in 1899 in Bradford, where it still has its headquarters. The company operates nearly 500 stores and employs over 110,000 people.
William Morrison founded the company, and his son, the late Sir Ken Morrison, ran it for 50 years.