The shelf life of supermarket chiefs just isn't what it was. After five years as Morrisons boss, Dalton Philips has become the latest chief executive to fall in the supermarket price wars. The firm announced he would leave after their financial year end in March, following underwhelming Christmas results.
Morrisons' like-for-like (LFL) sales were down 5.2% for the six weeks to January 4th, including fuel. Factoring out fuel revenues, which have been hit by the oil price collapse, the supermarket's LFL sales were down 3.6%, leaving full year profit predictions at £335m-£365m.
It says a lot about Morrisons' 2014 that this represents a marked improvement over recent quarters, when sales kept falling 7% or 8% at a time. It's still, however, the least impressive performance of the Big Four supermarkets over this key period. Not that that's saying much.
In recent years, the traditional supermarkets have been afflicted both by super low-cost upstarts Aldi and Lidl and by a customer exodus to convenience stores, which has left many of their larger stores painfully unprofitable. Caught between this supermarket Scylla and Charybdis (no, that's not a new, even cheaper Greek discounter), Morrisons has arguably fared even worse than Tesco.
According to Kantar Worldpanel consumer spending data for the 12 weeks to January 4th, overall grocery spending was up 0.6%, the best rate since August, while price deflation was 0.9%. The Big Four's combined market share dropped 1.2% in the period to 74.1%, exactly the amount by which Aldi and Lidl's combined share rose, to 8.3%. Morrisons was down 0.2% to 11.3%.
As a result, Philips' departure is hardly surprising. While Morrisons' low price strategy always made it particularly vulnerable to Aldi and Lidl, Philips was slow to adapt to trends like online grocery shopping, the growth of convenience stores and reward card schemes.
Indeed, it's quite impressive that Philips has lasted this long, given that the supermarket's patriarch Sir Ken Morrison publicly called his strategy 'bullshit' way back in June. Such stinging endorsements don't normally do much for a business leader's credibility, and the markets reacted favourably to Philips' departure. Morrisons' shares rose 4.4% to 184.6p in early morning trading on the news.
Looking forward, Andrew Higginson, who will replace Sir Ian Gibson as chairman at the end of this month, said Morrisons needed to return to growth (well, duh). 'The Board believes this is best done under new leadership', he said, adding 'I would like to thank Dalton for his contribution as CEO.' So thanks, but bye.
What next for Morrisons then? The firm did announce today that it had served its millionth online customer and opened 17 convenience stores during the quarter so far (46 for the year), but this may very well be a case of too little, too late.
Of greater significance may be Morrisons' decision to dispose of ten unprofitable supermarkets, something it had been reluctant to do before now. 'The brand's property portfolio is one of few "get out of jail" cards,' said Phil Dorrell of retail consultants Retail Remedy. 'It is busy playing it by unloading up to £500m of property assets this year.'
It's unclear yet whether this is the beginning of a fully fledged stripping down strategy. Much will depend on who replaces Philips as boss. Whoever it is, they'll need to be drastic as Tesco boss Dave Lewis to return the store to its halcyon days, before anyone had heard of Aldi and Lidl.
Could it take more than a new manager to reach that unlikely place? 'In a consolidation environment, it's looking like the most obvious takeover candidate,' said John Ibbotson of Retail Vision, 'but who would want them?' Indeed.
Philips might soon have some company on the burn pile of former Morrisons bosses. His predecessor at the supermarket and current M&S boss Marc Bolland is facing similar pressure, as M&S reported even more dismal Christmas figures. General merchandise sales there dropped 5.8%, leading David Cumming of investor Standard Life to question his continued tenure at the retailer.
'I think the chairman and independent director are probably asking themselves whether his scorecard is acceptable', Cumming told BBC Radio 4.
Compare Morrisons' Christmas performance with Sainsbury's, which axed 500 'store support' jobs today as part of a target to save £500m, and Tesco's and judge for yourself whether Philips had to go.