KAM PRAJAPTI beamed from ear to ear as he watched shoppers queuing at the checkouts with overflowing trolleys.
“I expected an initial rush before they returned to Asda. But they have kept on coming,” said Prajapti, the manager of the former Safeway store at Queensbury, north London.
Two weeks ago Prajapti’s store was converted into a full-blown Morrisons. It was a significant event — and not just for Prajapti and his staff.
Queensbury is the first Safeway store in London to be converted after the £3 billion takeover of the supermarket chain this year.
For beleaguered shareholders in Wm Morrison — who have had nearly £2 billion wiped off the value of the company in the past six months — making stores like the Queensbury one work is vital in proving to an increasingly sceptical City that Morrison can win over customers outside its heartlands in the north and Midlands.
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After last month’s profit warning, the first in the company’s history, a number of City scribblers have questioned whether Sir Ken Morrison, the chairman, can manage the integration of Safeway which has transformed Morrison into a national player with 552 stores and annual sales of £13 billion.
“The store-conversion programme ... will ultimately determine the success or otherwise of the transaction,” said Mike Tattersall, a retail analyst at Cazenove, the broker.
So two weeks on, how was Morrison’s first conversion in the Safeway heartland of London performing?
Prajapti would not be drawn on numbers — but his broad grin said it all and later, as we stood by the checkouts, he boasted: “We are not only seeing more customers, they are also spending more money.”
It was a wet Wednesday morning and the store was certainly bustling with customers, while a few miles down the road the Asda store at Wembley Park lacked the usual buzz (Asda insisted that it was trading “in line with expectations”).
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It took just four days to convert the former Safeway store — changing the signs and layout and restocking the shelves — but months of preparation.
“It’s a change in culture. It’s about learning the Morrison way,” said Prajapti, who worked his way up to store manager after joining Safeway as a part-time trolley boy 15 years ago.
Former staff at Safeway’s Hayes headquarters may talk of a culture clash, but Prajapti insisted it had been a change for the better. “Everyone is geared to helping the shops. It’s no longer about head office,” he said.
And while the retail establishment was shocked by Sir Ken’s decision to shut down Safeway’s state-of-the-art distribution system, sticking with Morrison’s paper-based system, the move had gone down well in the stores. “I can run my shop now,” said Prajapti.
Department managers and supervisors at Queensbury were sent to other Morrison stores to retrain. And new staff had to be recruited to run the butcher’s counter and salad bar.
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Prajapti has also been helped by Gary Hodnett, former manager of the Morrisons store in Grays, Essex, who has worked alongside him for the past four weeks.
While the Queensbury store was converted without any fuss, Morrison has been showing off the converted Milton Keynes store to City analysts.
Tattersall said: “We are generally wary of drawing firm conclusions from store visits, but our initial impressions were very positive.”
“Although a relaunched store inevitably benefits from pent-up demand following its closure period, and will be further boosted by reopening promotions, there is no doubt that on the day of our visit the store was trading extremely well.”
The Morrison management is also pleased. Next month Bob Stott and Marie Melnyk, joint managing directors of the notoriously media-shy company, plan to show financial journalists round the store.
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The success of Milton Keynes has convinced Tattersall that Morrison can win round shoppers and investors, and he compared the process to the transformation of the Tesco brand in the 1990s.
“We expect customers to react very positively to Morrison’s ongoing conversions of Safeway stores. We would strongly advise sceptics to visit a converted store before selling the shares,” said Tattersall.
Sadly for Sir Ken, few appear to be taking Cazenove’s advice — with a number of long-standing shareholders, including Threadneedle Asset Management, selling out. In fact, a recent investor roadshow appeared to backfire, with investors fearing further bad news.
And while Milton Keynes may have won some over, Andrew Fowler, analyst at Merrill Lynch, the investment bank, was not as convinced.
He had visited two stores, in Southport and Cheshire, which he described as “cramped” and “a pastiche” of a real Morrisons store.
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In a note to clients he also criticised the stores’ new ranges. “Shoppers in Southport and Chester ‘aren’t short of a few bob’, as they say in those parts, and yet Morrison had put in its own ‘a quarter the size’ range of ready meals, to both store managers’ dismay,” he said.
Other analysts argued that getting the first few stores right is not difficult — the challenge, they said, would come when Morrison got to work on the rump of the Safeway chain. It hopes to convert three stores a week — with just over 50 converted stores trading by Christmas.
While many questions remain about the dismal performance of the remaining Safeway stores, Sir Ken’s succession plans and the strength of the management team, it is by the performance of the converted stores that the City will judge Sir Ken.
He can only hope that all his former Safeway managers “convert” as well as Prajapti.