Monday, 5 July 2021

Morrisons Facing Bidding War After Accepting Fortress-Led Offer Worth £6.3bn

Another private equity group, Apollo Global Management, is among the potential counter-bidders circling Morrisons.

NamNews Implications:
  • Despite promises re future action…
  • …a bidding war will result in a higher takeover price.
  • Meaning that the purchaser will need to cover the additional cost.
  • (and justify the level of investment…)
  • It can be assumed that Morrisons are running a very tight operation (i.e. little scope for internal cost reduction)
  • Therefore remaining options will then be:
  • Sale & leaseback of the 85% owned retail estate (resulting in lower net margins because of having to pay rent for stores).
  • Downward pressure on supplier prices.
  • Or a mix of both…?

Friday, 2 July 2021

Government Holds Emergency Talks To Avoid Gaps On Supermarket Shelves

Officials from the Department for Environment, Food and Rural Affairs (Defra) are reported to have discussed potential solutions, including relaxing restrictions on drivers’ working hours and a temporary suspension of overnight delivery curfews, whilst increasing HGV training capacity for local drivers.

NamNews Implications:
  • When the public sense shortages, stock-piling will follow.
  • An emergency temporary stopgap would be to allow more EU drivers into the UK.
  • Hopefully it will not take the government too long to recognise the obvious?
#LorryDrivers #FoodShortages #StockPiling

Asda Launches ‘Express Delivery’ Service

This offers home delivery within an hour. However, unlike some other providers, the UK’s third-largest supermarket is making its full online product range available for rapid delivery.

NamNews Implications:
  • If Asda customers are prepared to pay delivery fees (£8 plus) for Asda’s service…
  • …this becomes a pointer for other mults.
  • Suppliers need to ensure their supply chain responses are up to these standards.
  • And add Fancy, Getir, Weezy, Gorillas and Jiffy to their strategies...
#QuickCommerce #AggregatorsPurePlaysRetailers

Grocery Market To Slow Sharply In Short Term; Online, Discount And Convenience To Remain Fastest-Growing Channels

In its annual retail food and grocery channel forecasts, IGD predicts that the unprecedented 8.5% growth seen in 2020 will slow to 1.7% in 2021 and then to 0.9% in 2022, as shoppers economise and the eating out industry reclaims sales. However, this sharp decline is expected to be followed by a period of modest recovery that will see the market grow by 8.1% to £229.1bn over the next five years. 

#PredictionsByChannel #GroceryChannelShares #5YearPredictions

Asda To Adopt Hybrid Working Model

The 4,000 staff who work at Asda House in Leeds and George House in Leicester will be able to choose where they work, including home, in the office, or even at a store or depot.

NamNews Implications:
  • A pointer for all suppliers and retailers.
  • 4,000 Head Office staff will be able to choose where they work, including home, in the office…
  • …or even at a store or depot.
  • Radical and permanent.
  • Welcome to the new normal…
  • Just one of today's 17 NamNews bulletin-items
#NewNormal #WorkingFromHome

Friday, 25 December 2020

Optimising the risk and uncertainty of 2021


Most people are heading towards a 10-day break that will be anything but traditional. After a traumatic, challenging year many would have used this as a period of reflection and mental adjustment to the year ahead.

However, this coming post-lockdown year will be different.

A nine month restraint on trade has severely fractured the UK economy, causing untold damage, sometimes terminal, to sectors like traditional non-food retail, hospitality, and travel both commute and tourist, via rail, air and sea. The resulting decimation of demand means there is a need for fundamental resets of business models, a subject of separate NamNews coverage in the New Year.

All of this with an overhang of Brexit uncertainty to further complicate the mix.

Companies will struggle to cope with this toxic mix to varying degrees, all reflecting their risk profile and that of their people. In other words, they will act in ways determined by the extent to which they are risk-seeking, risk-neutral or risk-averse…

They will attempt to apply a mix of fire-fighting to survive, trying to be certain about a medium-term that is anything but, and at the same time needing to apply some type of long term strategy.

All of this without being able to derive much benefit from analysis of unprecedented historical performance.

In terms of how 2021 will affect you and your business, think uncertainty, short supply, inadequate resources of time, money and people. This uncertainty will encourage risk aversion in companies playing it safe whilst awaiting a return to ‘normal’...

But the fact that so many businesses will react in this way means there are opportunities available for those that are risk-seeking, willing to take a calculated chance based on inadequate data, making sufficient sense of the uncertainty that they can take meaningful action.. Even companies and management that are risk neutral, willing to take some risk, can avail of some of the opportunities that an uncertain 2021 will provide, in a world of super-savvy consumers unwilling to accept anything but demonstrable value for money.

In other words, for those that are willing to emerge from under the duvet in the New Year, opportunities abound…

However, whilst it might seem reasonable to allow a ‘settling down’ period before making robust plans to cope, pragmatists know that even in normal times, business does not permit such luxuries.

Despite the unprecedented nature of what is still happening globally, regionally and locally, we have to make sufficient sense of the turmoil to survive and even grow a little in 2021. In attempting to so do, we can rely on the fact that many will ‘wait and see’, thereby providing proactive competitors with opportunities to optimise rivals’ ‘inertia’ in 2021…

In effect, we have to try to make the abnormal normal, and attempt to optimise the chaos via a lens of pragmatic realism… In fact, if our business world in 2021 seems in any way ordered, we are probably not looking at it properly.

Essentially, we believe it is imperative that the ‘pandemic’ be regarded simply as a catalyst and that the real damage to businesses and the economy has been caused by universal lockdown. This is a fundamental requirement for anyone wishing to take meaningful and productive action in 2021.

We then have to reduce our offering of Product, Price, Presentation and Place to its very basics, a ‘package’ that is equal to or slightly better than alternatives available, delivering to our consumer literally in any way the choose to buy, and resulting in sufficient satisfaction that they will willingly come back for more... (and perhaps even ‘tell a friend’)…

In effect, we have reached a position so fundamental that we need to go back to basics, as if entering a market for the first time, with a partial advantage of some basic knowledge of the category.

So, as we move into the final reflective-time mode of a final ‘traditional’ Christmas break, instead of trying to forget it all, we have an opportunity to spend a little time trying to reduce our business idea to its fundamentals, meeting consumer need by delivering more than it says on the tin, every time.

But above all, keeping in mind that in 2021 those that can manage risk will survive and can even thrive…

Monday, 6 January 2020

ROCE - the ultimate KPI Helping Sainsbury's grow their ROCE

NAMs needing to understand real profitability (their own or that of the customer) have to be able to calculate Return On Capital Employed. i.e. (see above diagram) putting a company's sales below and above the line, shows that ROCE is a combination of Profit on Sales, times Sales divided by Capital Employed. In other words, Margin x Capital turn.

You are either in a small margin, rapid rotation business (chilled produce) or a large margin, slower rotation business (Cosmetics).

You improve business profitability by improving the margin or speeding up rotation...

Taking Sainsbury's latest 2019 Annual Report, we have NamCalced their ROCE 1.97%, pre-tax Net Margin 0.82% and Stockturn 15.03 times, as follows (in millions):

Help Sainsbury's improve their ROCE (and thereby drive their share price) by a combination of improving their net margin, and improving their capital rotation, as follows:

Three of the calculators for NAMs in NamCalc!

Thursday, 28 November 2019

Delay of a price increase - Cost & Value?

(Holding back a trade price increase for Asda, the cost and value for supplier and retailer)

You need a price increase to cover rising costs but have agreed with Asda to maintain current prices for 1.5 months following the new price introduction.

What is the cost to you and the value to Asda in terms of incremental sales?


Annual sales to Asda = £660k
Your Gross Margin = 43.6%
Costs rise = 8%

You have agreed an 8% price increase to restore your % Gross Margin

You have negotiated a 1.5 month delay in implementing the price increase for Asda.

What is the cost to you and the value to Asda of the delay?

NamCalc Tool 13 below, demonstrates that an 8% price rise is required to restore your % Gross Margin.

It also shows that the 1.5 month delay costs you £3,720, and you would need incremental sales of £8,525 to recover your lost gross margin.

For Asda, with a pre-tax Net Margin of 2.1%, the £3,720 is equivalent to incremental sales of £177,142, a point worth making in negotiation…?

Click to enlarge