Shares in Morrisons bounced six per cent in early trading, after it announced chief executive Dalton Philips will step down after five years at the helm, while Andrew Higginson, an ex-Tesco executive, will take over from chairman Sir Ian Gibson later this month. Philips will stay on until the company's end of year results in March.
The not-so-unexpected announcement comes as the supermarket reported like-for-like sales excluding fuel were down 3.1 per cent in the six weeks to 4 January. Total sales excluding fuel were down 1.3 per cent.
Items per basket improved somewhat, jumping from a fall of 2.4 per cent year-on-year in the third quarter to a drop of 0.2 per cent. Morrisons said Black Friday had impacted the start of the reporting period. Underlying profit before tax is expected to be between £335m to £365m. The FTSE 100 retailer will also close 10 loss-making stores.
Why it's interesting
Supermarkets are finding it increasingly difficult to differentiate and are having a tough time taking on the discounters in terms of price. However, Morrisons' rivals Sainsbury's and Tesco pleased investors with better-than-expected sales figures over Christmas. The City had forecast that Morrisons' like-for-like sales would drop between three and four per cent over the festive period.
So while it performed in line with expectations, it is still the worst performer in the sector among the major supermarkets over Christmas.
The Bradford-based supermarket revealed a plan in March to allocate £1bn to price cuts over the next three years, hoping to go toe-to-toe with the discounters. Asda is slashing the cost of 2,500 "essentials" while Tesco is cutting prices of some of its most popular products like Hovis and Coca-Cola.
But this morning, John Ibbotson from retail consultants Retail Vision, pointed out that the results had been surprisingly well-received.
Never have such poor results been so highly regarded. It's verging on the tragi-comic... Late arrivals to online, convenience, a delayed incursion into the rich south, and hesitant leadership, effectively sealed his fate.While sales may be improving slightly, Morrisons remains, by a distance, the weakest of the Big Four. Despite cutting prices and trying to match the discounters, Morrisons has lost its price perception and leadership to Asda. In a consolidation environment, it's looking like the most obvious takeover candidate — but who would want [it]?
What the company said
Soon-to-be chairman Higginson commented on Dalton's resignation:
I would like to thank Dalton for his contribution as CEO. He has brought great personal qualities and values to his leadership of the business, having had to manage against a background of considerable industry turmoil and change.
Dalton Philips said:
Morrisons is a great company with exceptionally talented people and I have been very proud to have worked with them. Over the last five years, we have made many improvements to the business and given Morrisons strong foundations for the future.
Major supermarkets are under intense pressure to cut prices for both petrol and basic goods. It remains be seen whether Morrisons' price cut plan will entice shoppers faced with similar offers from rivals. The company will be disappointed to say the least that it holds the wooden spoon among listed grocers. Morrisons has been making modest improvements and today's management shake-up will make it a key company to watch.