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Morrisons’ price cutting gamble costs them dear in supermarket war


Morrisons have reported a fall in half-year profits by 51 per cent, its lowest figures for eight years, as the supermarket continues to suffer in the ongoing price wars. Like-for-like sales (excluding fuel) fell 7.4 per cent, compared to a 1.6 per cent fall last year. Results showed that profits were hurt by its decision earlier this year to cut prices to counter the loss of market share to other supermarkets such as Aldi and Lidl, and by a weak food market more generally.

The chain’s executive Dalton Philips said, “We are six months into the three-year plan that we set out in March and, although it is early days, I am encouraged by the progress we have made. There is an enormous amount of change and modernisation flowing through our core business, much of it enabled by new systems.”

Julie Palmer, Partner at Begbies Traynor, said: “This time round, Morrisons’ gamble has failed to pay off. Both LFL sales and underlying pre-tax profit have decreased dramatically as Morrisons has struggled to compete with spiralling prices and to find its feet amongst the five ‘value’ retailers, with its products still deemed too expensive against the likes of Asda. Whilst Morrisons is cash generative, it is clear it should re-invest that cash in strengthening its online and convenience store offering and its price competitiveness rather than placate shareholders before it’s knocked out of the race altogether.”

Phil Dorrell, director of retail consultants, Retail Remedy said “For a retailer that has lagged dangerously far behind the technology curve, the idea that it will become a flag bearer of the next generation of grocery retail will ring hollow. In six months’ time, a third of the way through the three-year plan, there will have to be a material boost to the numbers or the great turnaround will be on decidedly shaky ground.”

Bryan Roberts Retail Insights Director EMEA, Kantar Retail said “Morrisons has provided some unsurprisingly gloomy news on like-for-like sales and profitability, but the reportedly decent progress in online hints at a glimmer of silver lining.” He continued to say, “We have been moderately alarmed by what we perceive to be fairly quiet footfall in some stores, reaffirming to us that Morrisons needs to stop hiding its lamp under a bushel and roll out a consistent and sustained marketing campaign that educates both lapsed shoppers and potential new shoppers into what they might find in-store.

Morrisons is one of the “Big four” supermarkets, squeezed between other discount chains such as Aldi and Lidl. It has been under intense pressure to keep up but is struggling as it was late to join in with convenience store offerings and online grocery shopping.

Published on Thursday 11 September by Editorial Assistant

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