New chairman needs bold strategy to reverse Morrisons’ fortunes

THE incoming chairman of troubled supermarket chain Morrisons needs to come up with a bold strategy if he is to transform the fortunes of the group, retail experts have said.

It was announced yesterday that Andrew Higginson, the former financial director of rival group Tesco, is to take on the role, replacing Sir Ian Gibson when he retires in 2015.

Mr Higginson has been described as a “man on a mission” with a lot to prove, having spent more than a decade at Tesco before leaving 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.

But Phil Dorrell, a director at Retail Remedy, says that listing the challenges Higginson doesn’t face would be far less time-consuming than listing those he does.

“Morrisons is adrift and it will take some doing to get it back on track,” he says.

“Higginson, who has something to prove after being passed over for Philip Clarke, is a man on a mission and I suspect he will look at this as a huge opportunity to prove some people wrong.

“Higginson needs to start with a comprehensive review of the existing management team, especially Dalton Phillips.

“He then needs to create a clear strategy because Morrisons, in recent years, has had very little sense of direction. And the little strategy it has had hasn’t been bold enough.”

Dorrell said Higginson also needs to review the pricing strategy, which he says is “deeply flawed.”

“There’s a lot to do and not a huge amount of time to do it,” Dorrell added.

Higginson, currently chairman of home shopping group N Brown, will be stepping down from his role as chairman at Poundland, to be replaced by Darren Shapland.

Jon Copestake, retail analyst at The Economist Intelligence Unit, believes that Higginson’s experience at Poundland will prove the most advantageous to Morrisons.

“Having been passed over by Tesco for Philip Clark this Morrisons appointment does give Andrew Higginson an opportunity to prove himself with a big four retailer, although it is probably his experience with Poundland that Morrisons will value more to address the current market situation,” he said.

“As incoming chairman he faces many problems, as does incoming CEO at Tesco Dave Lewis. Morrisons and Tesco have been the hardest hit of the big four retailers by structural changes in the market and the rise of discount retailers. Until this year Morrisons had little or no convenience or online strategy to speak of and continued declines have shown that the retailer is some distance away from turning a corner.”

He added: “Higginson brings his Poundland expertise just as big retail embarks on a good old fashioned price war. While this may be perceived as the most effective means of meeting the challenge of discounters, it will have a damaging impact on margins and leave less room, or funds, for the incoming chairman to develop more innovative strategies.”

Meanwhile, latest grocery share figures from Kantar Worldpanel show that discounters Aldi and Lidl are continuing to win sales and market share from the major supermarket groups including Morrisons, The Co-operative Food and Iceland.  

The figures for the 12 weeks ending July 20, 2014, show records for the German duo.  

Among the big four grocers, both Asda and Sainsbury’s have held onto their market shares of 17.0% and 16.6% respectively. Conversely, Tesco and Morrisons have recorded losses with sales for both outlets declining by 3.8% compared with this time last year.

Iceland has posted a small drop in sales, its first since 2005, but has retained its 2.0% share, while the Co-operatives market share fell from 6.5% to 6.3% as sales fell from £1.6bn in 2013 to £1.57bn.

Edward Garner, director at Kantar Worldpanel explains: “Aldi’s 32% growth rate has lifted its market share to 4.8%; this is a new record for the retailer and means it has nearly caught up with Waitrose on 4.9%. Similarly, Lidl sales have grown by nearly 20% which means it now accounts for a record 3.6% of the grocery market.

“Waitrose has continued to resist pressure from the competition and has grown sales by 3.4%. This figure is well above the market average and thereby has lifted its market share.”

Kantar Worldpanel said grocery price inflation had fallen for the 10th successive period and now stands at 0.4%. Competitive pricing among the big grocers and deflation in the price of staple items such as vegetables, milk and bread has driven inflation to the lowest level since October 2006. As a result, market growth has fallen to 0.9% – the lowest figure for 10 years.