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Is Morrisons in terminal decline?

New boss Davis Potts's radical reforms are yet to bear fruit.

by Jack Torrance
Last Updated: 21 Dec 2015

Hot on the heels of Sainsbury’s poor results yesterday, Morrisons this morning dropped its own bomb. Its like-for-like sales (excluding fuel) were down 2.9% in the thirteen weeks to 3 May, better than expectations but nonetheless a bad sign after months of decline.

Chief executive David Potts took the helm in March and has since made a number of changes in a bid to return the supermarket to its roots. From tiny details like reviving ’10 items or less’ tills to getting rid of hundreds of managers, including five senior directors, he’s clearly been keen to make his presence felt. Unsurprisingly it seems the changes are yet to make an impact.

Whatever he’s feeling, Potts is doing his best not to appear alarmed. ‘My initial impressions from my first seven weeks are of a business eager to listen to customers and improve,’ he said. ‘I have been very pleased by the desire and support of colleagues, and by the genuine warmth and affection for Morrisons shared by both colleagues and customers.'

Potts has got a mammoth task ahead of him though. It’s become clear that the dominance of the ‘Big Four’ supermarkets is under threat as discounters and upmarket food retailers muscle in on their territory from both ends.

‘Radical though they are, Potts' reforms will take time to have an impact,’ said analyst Paul Thomas of Retail Remedy. ‘Morrisons continues to be the hardest hit of the Big Four by the rise of the discounters, and its limited number of non-food items means it feels the pain of the food price war more acutely than its rivals. Slashing prices may improve sales volumes but if it comes at the expense of profit, the brand’s steady decline will not be checked.’

The mid-market grocers certainly can’t contend with the discounters on price alone, but in a market that’s so driven by price at the moment they will struggle to persuade consumers that their food is worth what it costs. Inveitably, some are beginning to ask whether Morrisons' decline is terminal. It might be a bit soon to call time on the ailing retailer but Potts has got a lot of work to do.

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