FINANCIAL REPORTING AND ANALYSIS

Financial Reporting and Analysis

Financial Reporting and Analysis: Morrison

Introduction

Wm Morrison Supermarkets Plc (Morrison) is a supermarket chain operator. The company along with its subsidiaries offers a range of branded and private label products. It operates around 425 stores in the UK. Morrison is the UK's fourth largest supermarket.

Part - 1: Company Background

Company's History

Wm Morrison (Morrison) was founded in 1899 by William Morrison, an egg and butter merchant. In 1958, the company opened its first counter service store in a small town-centre shop in Bradford, UK. Morrison opened its first supermarket in Victoria, in 1961. Morrison started trading on the London stock exchange in 1967. In 1978, the company acquired Whelan Stores and Morrison began operating in Lancashire, UK. Morrison's wholly owned subsidiary, Farmers Boy, began operations; in 1980.The company opened its first distribution centre, Wakefield 41, in 1988.

In 1990, the company's distribution centre (Wakefield) expanded its operations to include chilled storage and an ambient storage area for produce. Morrison opened its second distribution centre, Gadbrook Park in Cheshire (UK) in 1997. The company opened its first store in South of England (in Erith) in 1998 and in Wales (in Rhyl) in 2000. The company opened its first store in Scotland in 2004. In the same year, Morrison acquired its larger competitor Safeway. The acquisition enabled Morrison to become the fourth largest retailer in the UK and more than doubled its store presence. In 2004, Morrison sold 114 Safeway Compact Stores (of which it sold 63 stores to Somerfield Stores and 51 stores and a distribution centre to Northwharf Investments).

Position in the Industry

The UK food retail industry had total revenue of $186.1 billion in 2009, representing a compound annual growth rate (CAGR) of 4.2% for the period spanning 2005-2009. Hypermarkets, supermarkets, and discounters sales proved the most lucrative for the UK food retail industry in 2009, with total revenues of $114.1 billion, equivalent to 61.3% of the industry's overall value. The performance of the industry is forecast to decelerate, with an anticipated CAGR of 3.4% for the five year period 2009-2014, which is expected to drive the industry to a value of $219.4 billion by the end of 2014.

Wm Morrison maintained its position as the UK's fourth-largest retailer, with a value share of 4% in overall retailing in 2010. The bulk of the company's sales come from its supermarkets, a channel in which the company held second place with a 19% value share in 2010. Within hypermarkets, Wm Morrison held a 5% share of value sales, placing it in fourth position, whilst it held a 3% share in forecourt retailers, placing it in seventh position. The company recorded revenues of $22,644 million in the fiscal year ending January 2009, an increase of 12.0% compared to fiscal 2008. Its net income was $717 million in fiscal 2009, compared to a net income of $863 million in the preceding year.

Competition

The supermarket retail industry of U.K faces enormous competition between the major five corporations (Ball, Kothari & Robin, 2000, ...