Morrisons to take on Aldi and Lidl in discount stores war

The chief executive of Morrisons, Dalton Philips, announces plan to slash price and take on discount rivals to tackle the company's £176m annual pre-tax loss.



Morrisons' earnings were hit by with declining sales and exceptional costs of £903m from write-downs on the value of its stores and the planned sale of its children's wear retailer Kiddicare.

They were also impacted by a drop in like-for-like sales for the year to 2 February, which were down 2.8 per cent.

Chief executive Dalton Philips said Morrisons said shoppers are now choosing to save by turning to discount stores like Aldi and Lidl, despite the improvements in the economy.
Shares fall

Shares plunged by as much as 10 per cent after the group issued a profits warning for the current financial year.

However, Mr Philips unveiled plans to invest £1bn over three years to improve the company's value and "defend and strengthen our competitive position".

He said: "The biggest challenge that we face is that there has been a fundamental change in how consumers view discounters.

"They are no longer going to them out of necessity. The perception has changed and there is a new price norm."

Morrisons will also sell off £1bn of its £9bn property portfolio by 2017, including some stores.

He added: "The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail."

He warned that all the major supermarkets were losing out to the discounters but that they had a larger "overlap" than any of its rivals.

"The rules have changed and we must change too. It is absolutely critical that we begin winning again in our core supermarkets. To do that we must compete on price," he said.
Discount wars

However, he insisted Morrisons would not turn into a discounter itself - saying prices would not have to match theirs, but be just low enough that their fresh food and quality offers would be worthwhile.

Morrisons said it would dispose of its stake in New York-based online grocer Fresh Direct as well, which it also bought in 2011 as it sought to develop its expertise in preparation for the launch of its own online venture.

Shares tumbled on today's results, but some analysts are optimistic about the stock after the strategy overhaul.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said "not all is doom and gloom" with the roll-out of online and convenience stores under way and a 10 per cent hike in the company's dividend.

I'll believe it when I see it!

Morrisons to hire former Tesco finance director Andrew Higginson as chairman



Supermarket chain Wm Morrison is to appoint former Tesco finance director Andrew Higginson as its next chairman.

Morrisons could announce that it has hired Mr Higginson, who left Tesco in 2012, as soon as Tuesday. He will replace Sir Ian Gibson, who said last month that he would step down.

Mr Higginson, who is also chairman of Poundland and home shopping group N Brown, spent more than a decade at Tesco but left after being passed over for the chief executive job. That role was handed to Philip Clarke, who was replaced last week by Dave Lewis, head of personal care at Unilever, after the supermarket chain warned sales and profits are “somewhat below expectations”.

City analysts fear Mr Lewis could launch a full-scale price war that would hurt rivals such as Morrisons.

Morrisons is under growing pressure to reverse its own decline in sales against fierce opposition from discounters Aldi and Lidl. It plans to “rebase” its profits and invest £1bn over the next three years into cutting prices and improving its own-brand food range.

Last month Morrisons reported a pre-tax loss of £176m for the year to February 2 after writing down the value of its property, IT and baby equipment retailer Kiddicare, which it subsequently sold to private equity firm Endless for £2m. Sir Ian admitted buying Kiddicare was a “mistake”.

The loss was revealed prior to the company’s AGM, which saw founder and life president Sir Ken Morrison blast the management team’s strategy as “bullsh**t”.

Less than two weeks later, Morrisons announced the loss of 2,600 jobs in a bid to streamline its management structure.

Morrisons declined to comment.

I'd have thought it would make more sense to hire someone from a successful company like Aldi or Lidl, not another failing dinosaur like Tesco?

So right in your comment Dutchman. These failures simply lurch from one failure to another.

"Morrisons to match Aldi and Lidl prices"

Morrisons today became the first of the “big four” supermarket chains to pledge to match the prices of discount rivals Aldi and Lidl.

The move will put pressure on Tesco, Asda and Sainsbury’s to follow suit as they attempt to stop shoppers flocking to the cut-price stores.

Morrisons has also launched its first loyalty card as the chain attempts to catch up with Tesco’s Clubcard and the Sainsbury’s Nectar card.

Morrisons boss Dalton Philips said: “Our Match & More card is the most comprehensive price match and points scheme in the UK. Because it price matches the discounters, it will provide the ultimate guarantee about Morrisons’ value-for-money.”

Morrisons customers will also have up to a year to spend their price match difference — far longer than at rival stores. Sainsbury’s offers a voucher at tills to match Asda prices, but it must be spent in two weeks and cannot be used online.

I'll believe it when I see it working in practice, sounds like a publicity stunt to me with no real substance

Tesco Arena this afternoon was a joke. I saw several people take the 'supervisors' and till staff to task because there were excessive queues. As you would expect, nothing was done, in fact a few more tills were closed!

Finally got my new "loyalty card" from Morrisons, thanks to a friendly checkout girl. (Some of the other staff couldn't give a damn).

Saved 40p already. I'm rich, I'm rich!

Morrisons hit again as sales fall 3.2pc



Morrisons’ sales fell a disappointing 3.2 per cent in the three months to December 7, making it the worst performer out of the “big four” supermarkets.

The Bradford-based grocer has been trying to lure back shoppers by slashing prices and price-matching discounters Aldi and Lidl, but data from Kantar Worldpanel showed its market share fell to 11.2 per cent from 11.6 this time last year.

​​Tesco sales fell by 2.7 per cent, its smallest decline in sales since June, while Leeds-based Asda’s sales fell by one per cent and Sainsbury’s by 1.8 per cent, making them the best performers of the “big four”.

Aldi’s sales grew by an astonishing 22.3 per cent, taking its market share from 4.0 per cent last year to 4.9 per cent, while Lidl’s sales rose 18.3 per cent to give it a market share of 3.7 per cent, up from 3.1 per cent.

Kantar Worldpanel’s head of retail and consumer insight Fraser McKevitt said: “​​Britain’s supermarket price war is ramping up ahead of the all-important Christmas period​.

“It’s not great news for the retailers, but it’s great news for the shopper​.”

The market returned to 0.1 per cent growth as shoppers put slightly more goods in their baskets.

​Mr McKevitt said Morrisons’ figures were hit by heavy vouchering and it has had teething problems with its entry into convenience stores.

“They have had a disappointing time with M Locals and have shut several,” he said.

“Running a convenience business is very different to running a supermarket. They have had to find out what ranges to put in and they’ve been learning as they go along. It’s clear that not all have worked. I imagine they have learned some hard lessons.”

He also said there is no sign of a real pick-up in sales since Morrisons launched its Match & More loyalty card which promises to match its three main rivals and Aldi and Lidl.

“I fear it could be a bit too complex,” he said.

“Match & More isn’t coming through in the numbers yet, but I think we will see Morrisons pick up in the next few months.”

He said the big question is whether Aldi and Lidl will retain customers over Christmas or whether shoppers will trade up for the all-important festive shop.

“Over the past 12 weeks, 54 per cent of shoppers have spent in a discounter. Christmas is focused around fresh, on the turkey and the vegetables, and this is an area where Morrisons are quite strong.