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Morrisons unveils £1 billion of price cuts
Morrisons boss Dalton Philips has defended his record as the Bradford-based retailer slumped to an annual loss of £176 million amid falling sales and one-off costs of £903 million.
Britain’s fourth-biggest supermarket fell into the red in the year to February 2 after a profit of £879 million the year before. Its share price plunged by as much as ten per cent on news of the slump and a future profits warning.
Mr Philips, who became chief executive four years ago, said Morrisons would focus in future on its core fresh food businesses while taking on discounters such as Aldi and Lidl, to which it is losing market share, through a three-year £1 billion price cutting drive that will dent future profits. Mr Philips (pictured) said discounters had caused the biggest upheaval in the grocery market since the 1950s. He admitted that Morrisons customer base overlapped with the discounters more than the other big supermarkets. Asked if his job was under threat, Mr Philips said he had tackled three of the four major challenges facing Morrisons when he arrived – no online operation, no convenience stores and antiquated IT systems.
The new online business was performing beyond expectations with more delivery vans and drivers being added, Morrisons would have 200 convenience stores by the end of 2014 and state-of-the-art IT systems were being introduced.
The latest strategy would meet the challenge from discounters which had structurally changed the marketplace. He insisted that Morrisons would continue to source, manufacture and sell quality fresh food while cutting checkout prices.
Mr Philips unveiled an aggressive price-cutting strategy, saying: “We are going to lower our prices on a permanent basis. The biggest challenge that we face is that there has been a fundamental change in how consumers view discounters.
“They are no longer going to them out of necessity. The perception has changed and there is a new price norm. The rules have changed and we must change too. It is absolutely critical that we begin winning again in our core supermarkets. To do that we must compete on price.”
The drive will be funded by savings on procurement, systems and other costs.
Underlying profits before exceptional costs for 2013 were down 13 per cent to £785 million but these are expected to fall by more than half to £325 million to £375 million. Like-for-like sales were down 2.8 per cent for the year.
The £903 million charge in its accounts included write-downs on the value of its stores and its 2011 acquisition of online children’s wear retailer Kiddicare, which it now plans to sell.