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Morrisons fires commercial director as sales decline deepen
(about 13 hours later)
Britain's fourth-largest grocer Wm Morrison said an underlying sales decline worsened in its third quarter with the group missing out on the growth of larger rivals.
Morrisons has axed its commercial director after a weak run of promotions turned the Bradford based supermarket giant into cannon fodder in an intensifying supermarket price war.
The firm also said on Thursday that commercial director Richard Hodgson is leaving the day-to-day business.
Its chief executive Dalton Philips blamed disappointing sales on a failure to stand out from a supermarket crowd that is bombarding shoppers with money off vouchers every week. Philips said it needed to "improve the effectiveness" of its special offers after suffering a bigger than expected drop in third quarter sales. Like-for-like sales fell 2.1% in the 13 weeks to 28 October which was a marked deterioration from the 0.9% decline recorded in the first six months of the year.
Martyn Jones, corporate services director, has been appointed interim commercial director pending the recruitment of a successor for Hodgson.
In addition to sharpening up its promotions, Philips said it needed to shout louder about what made Morrisons "different" such as its staff of more than 5,000 butchers, fishmongers and bakers. Richard Hodgson, who joined from Waitrose in 2010, has left the business with his duties picked up by Martyn Jones, the corporate services director, until a replacement is found. The company said Hodgson would receive a pay-off in line with his contract.
"With consumer confidence still fragile and high levels of promotional activity a persistent feature of the market, the trading environment has remained challenging through the period and sales were lower than anticipated," the Bradford-based firm said.
Some analysts have blamed Morrisons' problems on a move upmarket that has alienated its most loyal shoppers. A refurbishment programme is introducing extras such as cake shops, pizza counters and in some cases sushi bars into its supermarkets which were previously famous for their "pile-it-high-sell-it-cheap" aesthetic. It has also missed the boat on the current big shopping trends of home delivery and convenience shopping. Philips insisted the new look stores were a hit with shoppers, adding: "There is only one sushi bar in the country, it's in St Albans, and the sales are really strong." Though sales were lower than anticipated, Morrisons still expects annual profits to meet City expectations of around £913m. The shares closed down 1.5% at 263.5p.
Morrisons, which trails domestic rivals Tesco, Wal-Mart's Asda and J Sainsbury by annual revenue, said sales at stores open over a year, excluding fuel, fell 2.1% in the 13 weeks to 28 October.
That compares with analyst forecasts of a decline of 2%, according to a company poll, and is a deterioration on a fall of 0.9% in the first half.
Total sales, excluding fuel, fell 0.4%.
Though Morrisons said it expected the market to remain challenging for the remainder of the year it anticipated that its full-year performance would be broadly in line with internal expectations.
Latest industry data from Kantar Worldpanel has shown Morrisons lagging the sales growth of its three big rivals as well as smaller players such as discounters Aldi and Lidl, though this is partly explained by Morrisons' lower level of store openings as well as its lack of an online offer and a significant convenience business.
Morrisons said it recognised the ongoing importance of improving its performance, particularly in the communication of key points of difference to customers and in improving the effectiveness of its promotional activity.
Though the UK is out of recession, many retailers are still struggling as consumers hold back spending in the face of inflation, meagre wage increases and government austerity measures designed to cut record debt. Last week electricals retailer Comet collapsed into administration, threatening 6,600 jobs.
On Tuesday an industry survey said British retail sales slowed sharply in October, dampening hopes that consumers will drive the economic recovery, while bellwether British retailer Marks & Spencer posted a 3% fall in first half profit.
