Company News • 12.11.2015

Morrisons takes the tough decisions

David Gray is a Retail Analyst in grocery based in London....
David Gray is a Retail Analyst in grocery based in London.
Source: Planet Retail

Planet Retail sees the Q3 numbers from Morrisons as indicative of limited progress in terms of topline like-for-like performance.

However, we are encouraged by new management’s willingness to take the tough decisions exiting convenience in the quarter and ending the costly Match & More loyalty programme.

On Morrisons’ Q3 results, David Gray, Retail Analyst at Planet Retail, commented:

“As expected, the numbers this morning indicate limited progress with like-for-like declines coming in on a par with the previous quarter – although against tougher comps. The result also puts Morrisons behind key competitors – Sainsbury’s holding its own, Tesco making progress at home.

Even so, credit must be given to Morrisons new management under David Potts for taking some tough but necessary decisions to protect the long-term profitability of the business – exiting convenience and the price comparison loyalty scheme, Match & More. Both initiatives were a major cost and their removal will allow the chain to invest in the core proposition, hypermarkets & superstores. This after all is where Morrisons makes the vast majority of its sales and profits.

Even though convenience remains the UK’s second fastest growing bricks & mortar channel it is by no means a golden ticket to success, and new managements recognition of this can only be seen as a blessing. Challenges around site selection, ranging, pricing, and logistics all make convenience a tough nut to crack. Morrisons also faced players with over a decades experience in the channel, no walk in the park by any means.

The rationale behind price matching a limited range discounter through Match & More also has to be questioned. Their (discounters) sleek operating model, limited range, plethora of shelf ready packaging and lower staff numbers per store make it uneconomic for a full-range supermarket to price match a discounter. Morrisons may be moving in the right direction under new management though this has yet to show in the numbers.”

Source: Planet Retail

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