Morrisons cuts prices on 200 items as boss David Potts swings the axe in supermarket price wars

Lynsey Barber
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New boss Potts makes first price cuts (Source: Getty)

Morrisons is the latest supermarket to swing the axe in the ongoing price wars, with price cuts on hundreds of products.

David Potts, the former Tesco executive who replaced Dalton Phillips at the top, has made his first move in the battle of the supermarkets as it tries to compete with discounters and its big four rivals on price.

The cost of 200 products, including bread, milk, butter, sugar and other essentials, will be slashed as the supermarket tries to turn around falling sales and supermarket share against Aldi and Lidl.

"So, the British consumer continues to benefit from the re-basing of superstores prices after their sustained somnolent state," said Shorecap analyst Clive Black.

"The adjustment is time consuming and painful for investors. However, the reality is that the process of change has started with supermarkets now doing the right things for their customers in our view. In this respect there is more to do but we sense that we are closer to the end of the downgrade cycle to sector earnings and that further cuts will be less penal than the structural ones of the last couple of years."

It's not just shoppers benefiting from cheaper prices, according to Black, who says the Yorkshire-based supermarket is better placed to benefit shareholders earlier than rivals.

"With its debt reduction well under way and relatively low pension and lease exposure, a return to sales growth should positively impact Morrison's cash flows, earnings and share price particularly with its vertical integration in-tow," he added.

It's been a testing week for the retailer after narrowly avoiding demotion from the FTSE 100 and faced serious rebuke from shareholders over Philips' pay. A small ray of sunshine came as new figures revealed it was outperforming its big four rivals.

Lat year, Morrisons promised to invest more than £1bn in lowering price over three years. The price wars were taken up a notch at the start of the year, with Sainsbury's and Walmart-owned Asda kicking things off in January. Sainsbury's promised to spend £100m on reducing 1,000 products this year, while Asda invested £300m in lowering prices in the first quarter. Tesco soon followed with its own reductions.

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