Morrisons expands Amazon partnership with Prime Now offering

Supermarket chain Morrisons expanded its partnership with online retail giant on Wednesday, announcing a new service called 'Morrisons at Amazon'.

The FTSE 100 grocer said Amazon Prime customers in selected areas in London and Hertfordshire could now order a full Morrisons shop online via the Prime Now app.

Orders will be picked at a local Morrisons store and delivered same day by Amazon either within one hour for £6.99 or in a two-hour slot for free.

Morrisons said the new initiative broadens the wholesale supply services available to Amazon customers, which was launched in June and was said to have started well, having already been extended to thousands of Morrisons products.

The initiatives are capital light for Morrisons, the board explained, and although still in their early stages, will contribute to the £50m-£100m incremental profit opportunity it outlined in its 2015/16 preliminary results.

“As food maker and shopkeeper, we have unique skills to help build a broader new Morrisons through capital light growth,” said chief executive David Potts.

“'Morrisons at Amazon' is another exciting joint opportunity and makes Morrisons good quality, great value-for-money products available to even more customers.”

House broker Shore Capital said it believed the agreement suggests chief executive David Potts'; initial experiences with Amazon (and vice versa) have been encouraging.

While it has not adjusted forecasts, ShoreCap said the extension of the agreement "bodes well for the ongoing wholesaling activities of the group, so bolstering the capability of management to deliver on its aspiration of £50-100m of additional PTP to emerge from profit streams outside the core chain".

"With more robust profitability we believe Morrisons has growing scope to further deleverage, generate visibility into a rising dividend and even consider further shareholder friendly initiatives."

Analysts also pointed out that this is a tie-up that links Amazon Prime customers to Morrisons' offer and so is separate from
Morrisons.com, albeit rival Ocado's shares could react negatively to this news.

Indeed, while Morrisons shares were up 1.2% to 224.5p, Ocado's were down 5.4% to 266.95p.