Investors say 'meh' to Morrisons' latest price cuts

The embattled supermarket has announced another round of price cuts. It'll make its margins look even unhappier.

by Rachel Savage
Last Updated: 15 Jul 2014

Morrisons is on the march in the latest battle in the supermarket price war, slashing another 135 prices as part of a £1bn investment over the next three years. A statement of intent, but one that is eating away at margins with zero guarantee of tempting shoppers back from discounters Aldi and Lidl.

The prices of products ranging from peeled plum tomatoes to crinkle cut oven chips and bleach were reduced by an average of 14% today, after 1,200 price cuts at the start of May and the sacking of 2,600 managers just last week.

‘These are permanent price cuts, not promotions, and they won’t be the last,’ said chief exec Dalton Philips. ‘We are making a real difference to the cost of the weekly family shop by reducing prices that on products that our customers use regularly.’ Because families really buy a ‘giant pineapple’ every week…

Philips undoubtedly needed to do something to save his skin, after sales fell 7.1% in the 13 weeks to May 4. The first round of price cuts didn’t stop Morrisons’ market share from sliding still further, though.

Meanwhile, investors are less than impressed: former boss Sir Ken Morrison called Philips’ strategy ‘bullshit’ at the supermarket’s AGM earlier this month and shares ticked down around 0.5% this morning, as shareholders collectively shrugged.

So this latest, relatively small round of price cuts looks like a pretty futile attempt to grab headlines, while continuing to eat away at margins Morrisons can’t really afford to sacrifice. And, as Planet Retail’s research director Natalie Berg pointed out to the BBC, ‘Supermarkets can cut prices, but that does not mean that people buy more food.’

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today