In the aftermath of its poor financial results, supermarket chain Morrisons is preparing to close 23 of its stores this year.
Part of the Big Four grocers, Morrisons has been tied up in the supermarket ‘price wars’ which have left the company with an overall loss before tax of £792m, following 2013-2014’s £176m shortfall.
Aptly titled “A focus on building momentum”, the company’s report highlights that Morrisons is determined to stay positive after a disastrous year, which resulted in its lowest annual profit in eight years. This can be put down to the company’s £1.3bn writedown, with the value of Morrisons’ property dropping. The company’s ‘I’m Cheaper’ campaign cut prices by an average of 17%, while October’s ‘Match & More’ tactic also proved financially problematic. Aiming to match prices with German discounters Aldi and Lidl, ‘Match & More’ reduced the price of 130 ‘high volume everyday lines’ by 22%.The reductions proved too steep for the chain, resulting in total turnover decreasing by 4.9% to 16.8bn.
While reductions were high on Morrisons’ priority list in 2014, expansion was not. The chain’s capital expenditure fell by over 50% to £520m as the company decided to avoid mirroring its growth in 2014. Instead, Morrisons has decided to do the reverse and close ten of its smaller supermarkets in 2015, alongside shutting down 23 local stores. Though Morrisons has said that it hopes to keep hold of the 380 staff that will be affected with the closures, but this has not yet been confirmed.
Morrisons’ three year price cut plans have had a disastrous start and the company has no plans to try a new pricing tactic. The chain’s report states, “We are just one year in to our plan, and are determined to keep lowering prices for customers”.
It will be left down to new Chief Executive David Potts to pick up the pace and attempt to make the price cuts work. The former Tesco executive will take over at Morrisons next week, replacing axed Chief Executive, Dalton Philips. In a stock market statement, the company commented on how timely the change around is:
“With the financial year closing on 1 February 2015, the board and Dalton Philips have jointly agreed that as the new financial year begins it is the appropriate time for Dalton to relinquish his responsibilities.”
Andrew Higginson, Chairman of Morrisons welcomes the change around, citing that David Potts will focus on, “building trading momentum and being more like the Morrisons our customers expect”.