Morrisons sacks boss as Christmas sales slump

Morrisons chief executive Dalton Philips is to step down in March after the supermarket confirmed it was the worst performing of the major supermarkets over Christmas and announced plans to shut 10 lossmaking stores.

Sales at stores open for more than a year fell 3.1% excluding fuel in the six weeks to 4 January, the biggest fall of the major supermarkets. Morrisons admitted that its online business accounted for a 1% increase in like-for-like sales, making the fall at its stores even starker.

The grocery sector is experiencing a seismic shift in shopping habits as consumers move their shop to online and convenience and Aldi and Lidl at the discount end and Waitrose and Marks & Spencer’s at the top end increase their share. Morrisons was particularly impacted by these changes because it was late to shift to convenience stores and online shopping, only launching its ecommerce business a year ago.

Incoming Morrisons chairman Andrew Higginson praised Philips for “facing into and dealing with pricing issues” and for taking the business into online and convenience channels. However he said new leadership was needed to return the business to growth.

Philips is not thought to have a new job to go to and will stay on in his role at Morrisons until the end of the financial year in March to ensure a “smooth transition”. Morrisons is now on the hunt for a new chief executive, with Higginson saying that the appointment will “almost certainly” come from outside the business.

Neil Saunders, managing director at retail analysts Conlumino says the departure of Philips was “inevitable” given the long run of decline and lack of “effective recover plan”.

“Despite a raft of recent initiatives and changes – including moving online, launching a price-match scheme and pressing ahead with its convenience stores – nothing seems to have stemmed the tide.

“Progress has been made in many areas, but it has often been piecemeal and at the expense of brand clarity – what the brand stands for and how it is differentiated in a very crowded marketplace,” he adds.

Christmas sales

Despite Morrisons position as the worst performing supermarket over Christmas there are signs that Philips’ investments and focus on every day low pricing are bearing fruit.

The like-for-like sales decline is an improvement on the prior quarter, when sales fell 6.3%, and a year ago, when sales declined by 5.6% and Morrisons was forced to issue a profit warning.

There are also signs the turnaround is taking hold in some of the supermarket’s key performance metrics. Items per basket was down by just 0.2% year on year, compared to 2.4% in the prior quarter, while the number of transactions fell by 1.7%, again an improvement on the 3.3% drop seen in the third quarter.

The supermarket credits the launch of its Match & More loyalty card, claiming the launch has gone well and sign-ups are ahead of expectations. Convenience was also a strong point, with customer numbers doubling to 5 million over the festive period, while Morrisons served its one millionth online order last weekend.

Nevertheless, analyst have called the results “disappointing”, particularly given the better than anticipated trading updates from Tesco and Sainsbury’s.

Clive Black, head of research at Shore Capital, says: “Morrisons recent trading is set against a quite dreadful backdrop. Accordingly, the improving trend is much needed albeit appears to be as much about favourable multi-year comparatives rather than any notable improvement in underlying trading.”

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