Morrison Sales Miss Estimates as Retailer Loosens Ocado Pact

(Bloomberg) -- Wm Morrison Supermarkets Plc is loosening its pact with online retailer Ocado Group Plc so that it can add other digital partners as sales decelerate at the U.K.’s fourth-largest grocer.

The company has been Ocado’s exclusive partner in the U.K. since 2013, though tensions arose in 2016 when Morrison expanded cooperation with Amazon.com Inc. Using more delivery partners if needed could give greater flexibility in driving online sales, Chief Executive Officer Dave Potts said on a call with reporters Thursday.

“We will now be able to dance at more than one wedding,” he said. Morrison could “make a bit more” of its partnership with Amazon.

Potts faces the challenge of building on the grocer’s turnaround even as discounters Aldi and Lidl are gaining market share and after a revived Tesco Plc has improved its competitiveness. Morrison’s first-quarter sales rose 2.3%, short of analysts’ estimates and the weakest pace in more than two years.

Chief Financial Officer Trevor Strain said that despite the slowdown, Morrison still expects to generate a “meaningful” increase in profit this year.

The retailer faces tougher comparisons in the second quarter as unseasonably warm weather and the positive impact of the World Cup boosted its performance a year earlier.

The stock fell as much as 1.7 percent to a four-month low.

“There are early indications that Morrisons is starting to underperform its peers,” wrote Bruno Monteyne, an analyst at Sanford C. Bernstein. He added he’s concerned that the contribution from supermarkets to like-for-like sales growth has probably gone negative.

Potts said the renegotiation was prompted by the fire that took place at an Ocado warehouse in February, holding back Ocado’s growth. Under the new agreement, Morrison agreed to temporarily suspend part of its capacity at another fulfillment center, freeing up needed capacity for Ocado.

Ocado shares rose 0.6 percent.

To contact the reporter on this story: Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, John J. Edwards III

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