Morrisons: where did it go so right?
Supermarket Morrisons last week reported a continuation of its dramatic turnaround story, just two years on from crisis.
Today, we look at how the Bradford-based group, the UK’s fourth largest supermarket, has achieved it seventh straight quarter of underlying sales growth – in a sector where discount stores are increasing market share.
Like for like sales
David Potts joined as chief executive in March 2015 after dwindling sales and a drop in its reputation; he was tasked with turning the Big Four grocer around. Improvements in trading have been delivered since with a company wide focus on competitive prices, improved product ranges, better customer service and an investment in staff.
The company has also secured wholesale agreements with McColl’s and Amazon and undergone a home delivery/online revamp.
Like for like sales and transactions also increased. Like for like sales and translations were negative until 2015.
Analyst Phil Dorrell, partner at consultancy retail remedy, said change had been executed well. “There are no surprises that Morrisons is continuing to do well. They have made some very good leadership decisions, putting stores at the heart of the business,” he said.
“It’s about the quality of service, the diversity of the range – it’s not all just about price. The biggest losers when in competition with discount stores are those who are all about price. Morrisons, however, have many messages to talk about.”
Dorrell added that Potts had shown exceptionally strong leadership and had been “ruthless” in making a reasonable amount of changes to store management positions, which were needed in order to shake up the business.
Dorrell said the turnaround had been successful because Morrisons had focused on what it wants to achieve rather than trying to out manoeuvre competitors. He added that one area he felt Morrisons still needed to focus upon was its market street, as “it’s not the gourmet offer it was intended to be.”
John Ibbotson, director of the retail consultancy retail vision, commented: “By re-energising its food proposition and in putting customers first, Morrisons has regained their trust. This is another warning shot to the discounters, Aldi and Lidl.
The company’s interim results to July 2017 show underlying profit before tax was up 12.7% to £177m (2016/17: £157m). Turnover was up 4.8% to £8.42bn (2016/17: £8.03bn). Sales were up 5% to £8.42bn, while net debt fell by £262m and is now below its target of £1bn.
Its “Fix, Rebuild and Grow” strategy as part of its turnaround programme and recently announced a supply agreement with McColl’s in order to drive its wholesale business forward. This is expected to see total annualised wholesale sales across all partners exceed £700m, including tobacco, by the end of 2018.
