Like the majority of Britain’s supermarket chains, Morrisons has suffered repeatedly in recent years at the hands of discounters such as Aldi and Lidl which have offered consumers an alternative to the traditional “Big Four” template which dominated the grocery industry since the mid-1980s.
This has been thrown into sharp focus this week, with the supermarket’s first quarter results showing a further disappointing performance.
During the 13 weeks to the 3rd of May, like for like sales excluding fuel plunged by 2.9 per cent even when a 1 per cent boost from the newly launched online shopping division was taken into account. While this is admittedly a better result than was predicted by analysts and certainly a marked improvement upon the 7.1 per cent plunge recorded last year, it compares poorly to the 2.6 per cent drop during the fourth quarter of the last financial year and has raised concerns that Morrisons is continuing to haemorrhage market share to the discounters.
Despite new chief executive David Potts, who replaced Dalton Philips in March, implementing a series of changes in store such as the removal of electronic till management and removing hanging materials to create a feeling of spaciousness, Morrisons has also continued to close more stores than it opens – a policy which has roundly been adopted by all members of the Big Four. During the quarter the brand recorded a net reduction in selling space of more than 50,000 square feet, with further closures hinted to be in the pipeline should the situation not improve.
Yet Shore Capital analyst Darren Shirley believes that this may not come to pass, as he believes the arrival of Mr Potts will prove beneficial to the business.
He says; “It is clearly still very early days in Mr Potts’ tenure but we sense he is bringing a deep rooted and fundamental change to Morrisons that is for the better.
“We make this assertion not because Dalton Philips was ineffectual but because in this market the business needs an experienced leader.
“In this respect we demonstrably believe that Mr. Potts has hit the ground running.”
Mr Potts, a former Tesco executive, has pledged to further lower prices at the supermarket brand whilst increasing spending in areas such as product availability, cleanliness and customer service as part of a turnaround plan which is expected to be unveiled in more detail to coincide with the group’s half year results in September. He has already begun to address the latter issue in his brief position during the first quarter, having taken on 5,000 additional shop floor staff members since his arrival.
Expressing his confidence that underlying profits for the second half of the year would surpass those in the first half, Mr Potts claimed that customers would respond positively to the changes currently being implemented.
He continued; “This is a business with many attributes, some unique.
“Our task is to use those advantages to improve the shopping trip for customers and create value.”
Do you think Morrisons should be focusing more upon expanding its convenience network rather than “spring cleaning” existing large stores?
