Credit: Chatirygirl/Flickr

Morrisons' latest results are down, down, down, down

The struggling supermarket is yet to bounce back from its prolonged slump.

by Jack Torrance
Last Updated: 12 Jan 2016

With food prices on the slide and stiff competition from the likes of Aldi, Lidl and Waitrose, the ‘Big Four’ supermarkets (Asda, Morrisons, Sainsbury’s and Tesco) could be forgiven for struggling to maintain their sales growth of yesteryear. But things are looking particularly bleak for Morrisons, the northern grocer whose last boss was forced to fall on his sword earlier this year.

New chief exec David Potts hasn’t sat on his hands – weeks after taking the helm he cleared out the supermarket’s boardroom and announced plans to slash senior management jobs. He’s since closed several loss-making stores and sold off Morrisons’ convenience division to focus on improving the fortunes of its core business.

If they were the right actions to take, you wouldn’t know it looking at today’s pretty bleak third quarter update. Total sales (excluding fuel) were down 2% in the thirteen weeks to November 1 and down 2.6% on a like-for-like (LFL) basis. That’s partly because of falling prices, but volumes were down too –LFL items per basket were down 1.9% and LFL total transactions were down 2% year-on-year.

There’s a theme developing here - down, down, down, down. No wonder its share price also tanked, down (see?) 3.5% to 171.2p this morning. There was one crumb of comfort in the form of its net debt, also down from £2.34bn to £2.1bn since February, but that’s hardly something to write home about. Potts put on a brave face though, saying the supermarket was ‘making good progress in many areas,’ and that customers were sitting up and taking notice.

‘The business is moving at pace on the long journey towards improving the shopping trip for customers,’ he said. ‘Our priorities for the rest of the year are unchanged - to stabilise trading, reduce costs and further improve the capability of the leadership team.’

The results have provoked a mixed reaction from commentators. ‘To claim you are making good progress on the back of these numbers is bordering on the delusional,’ said John Ibbotson, director of consultancy Retail Vision. ‘David Potts has been in charge for nine months now but his turnaround plan isn’t working.’ The chain is ‘potentially ripe for takeover,’ he added, but the ‘Only question is, who will buy it?’

Planet Retail analyst David Gray was more forgiving. ‘Credit must be given to Morrisons new management under David Potts for taking some tough but necessary decisions to protect the long-term profitability of the business,’ he said. Potts’ controversial decision to get out of convenience stores was understandable, he said, because Morrisons’ competitors had a head start of more than a decade.

To be fair to Potts, nine months is a fairly short amount of time to turn around such a massive company in such a challenging market. But if the numbers don’t start to improve soon and Morrisons doesn’t have a very merry Christmas then he could be left with a lot of questions to answer.

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