Morrisons falls out of the FTSE 100, will sell food on Amazon

Supermarket chain Morrisons has fallen out of the FTSE 100 following a sharp drop in its share price. This is following near demotions that were narrowly missed twice in 2015. Share prices have fallen along with sales as shareholders are unclear how the supermarket will make back the difference. In 2016, the supermarket’s share prices have fallen around 17%, giving the supermarket a current market capitalisation of around ~£3.51 billion.

The final decision on Morrisons demotion was made by the London Stock Exchange by the end of trading on Wednesday 24th February based on the previous day’s closing price.

The move from the FTSE 100 to the FTSE 250 is likely to trigger share sales by tracker funds which only follow the UK’s biggest companies.

Morrisons and Amazon have announced a new supply agreement. In the coming months, hundreds of Morrisons products will be available to Amazon Prime Now and Amazon Pantry customers. Morrisons will provide a wholesale supply service to Amazon, allowing Amazon’s customers access to a wide range of Morrisons ambient, fresh and frozen products.

David Potts, Chief Executive, said of the Amazon agreement:

“Today’s agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.

“This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”

In addition, Morrisons has been in discussions with Ocado to grow and an agreement in principle has been reached. This involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre (“CFC”) in Erith, and Ocado delivering a store pick solution for Morrisons that leverages Ocado’s technology and Morrisons store assets. When implemented, this would enable, working with Ocado, to sell to customers all over Great Britain.

This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online. There can be no certainty that an agreement will be concluded.