Morrison denies Asda merger

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KEN MORRISON, the 62- year-old chairman of William Morrison, Britain's most successful regional supermarket chain, has scotched speculation that he is holding merger talks with Asda. And he says he has no intention of retiring.

Rumours that Asda is eyeing up Morrison have surfaced repeatedly because Mr Morrison, whose family controls 38 per cent of the shares, is approaching retiring age.

But he is dismissive of such talk. 'It is a perennial (rumour) that seems to circulate all the time. I am not aware that anything is going on, but you never know, do you?'

Speculation intensifed after Mr Morrison's wife died of cancer shortly before Christmas. However, Martin Ackroyd, the finance director, says that, if anything, Mr Morrison is throwing himself into his work even more vigorously.

Like those in all supermarket groups, Morrison shares have plunged over the past 12 months as competition has intensified. Last week, J Sainsbury announced 650 redundancies at head office.

But when Morrison, based in Bradford, reports its 1993 profits later this month, no one expects it to follow Sainsbury. According to analysts, there is no fat to trim.

Mr Ackroyd agrees. 'I am extraordinarily proud of our record of never making anyone redundant, and I do not want to sit down with someone and say: 'You have not got a job.' To get rid of 650 people you first of all have to have taken them on without too much thought. You always have to think of your customer, and if they (staff) are superfluous the customer will not be prepared to pay for them.'

Such Northern common sense characterises Morrison's approach. And it has worked.

The Director magazine has chosen it as Britain's top performing company in both 1992 and 1993 on the basis of its record in growth of assets, shareholder funds, turnover and profit before tax over five years.

However, its success is at least partly due to the food retailing sector's resistance to recession. The runners-up in 1993 were Sainsbury and Tesco.

Outstanding growth in profits and earnings-per-share propelled the share price throughout the 1980s. It started 1980 at 6p and reached a peak of 174p in December 1992. Since then, however, the share price has sunk back to 116p, and investors are beginning to ask if this miracle share has run out of steam.

If so, it breaks a run of success that started in the 1950s when, fresh from the army, Mr Morrison joined the family market stall. His break came in the 1960s when retail price maintenance was abolished. This ended food manufacturers' practice of setting the price at which goods could be sold, and opened the way for the supermarkets to pile it high and sell it cheap.

The first Morrison supermarket opened in December 1962 in an old cinema. The Stock Exchange listing came in 1968.

Last Monday, the 66th store was opened in Coventry. The group plans to open another six this year, followed by at least seven next year.

Throughout, the firm has stuck to its belief in putting the customer first. 'All I can say is that we put the customer first, second and third. If you get it right for the customer, everything else will fall into place. Once you start trying to please other people first, like the shareholders, the thing can fall apart,' Mr Ackroyd says.

Bill Currie, an analyst at Barclays de Zoete Wedd and a fan of Morrison, says: 'The Morrison offer (to the shopper) is an excellent offer. It has the lowest prices of any superstore operator in the country, the widest range and the widest service element.'

The service element operates on a Victorian marketplace theme and features a large number of counters with butchers, bakers and the like.

The group is also praised for its ability to buy sites at cheap prices.

Frank Davidson, an analyst at James Capel, estimates Morrison spends pounds 14m on each store, while Tesco and Sainsbury spend at least pounds 20m.

But this has done nothing to protect Morrison since it revealed lower-than-expected interim profits last September and said that 'ever-increasing competition' was putting pressure on margins.

The share price, in common with those of other supermarkets, has fallen sharply since.

(Photograph omitted)