Morrisons – "Stuck between a rock and a hard place"

RETAIL experts and market analysts have been out in force reacting to Morrisons’ latest disappointing figures.

Yesterday, the Bradford-based supermarket chain announced a worse than expected fall in quarterly sales.

Total sales excluding fuel were down by 4.2% (down 5.6% including fuel) and like-for-like sales were down 7.1% (8.2% including fuel).

One retail analyst said Morrisons is struggling to find its place in an increasingly polarised grocery market – one characterised by strong growth at both the top and bottom ends of the sector.

“Recent investments in store refurbishments, product ranges and fuel promotions have clearly yet to hit the sweet spot with core grocery shoppers, who have more choice than ever, but are spending less,” says David Gray at Planet Retail.

“Morrisons answer to under-performance – notably investment in convenience and online grocery expansion – cannot solve the chain’s problems on their own. Morrisons needs to get the bread and butter of its retail offer right: its core grocery business – stores trading from 20,000-40,000 sq ft. It is here where the real problem lies.”

He said “tinkering around the edges” with convenience and e-commerce will not provide a long-term solution, and that the negative impact on profitability of the latter’s roll-out should not be ignored.

“So, at present, Morrisons is stuck between a rock (the discounters) and a hard place (M&S Food/Waitrose), not to mention additional threats from Tesco and its UK improvement programme. It is a very uncomfortable position to occupy, one from which turnaround will be all the more difficult,” he said.

Meanwhile, Joshua Raymond, chief market strategist of Cityindex, said expectations were already fairly low in the market, given Morrisons warning last week that like for like sales were unlikely to improve anytime soon and its roll out of a series of aggressive price cuts as part of the broader £1bn investment to make the supermarket chain more attractive to discount hungry shoppers.

“Regardless, the forms shares price, which has fallen 15% in the last three months, shows investors are not placing large bets on Morrisons potential to turn itself around just yet, and the tone of this quarterly sales decline is unlikely to change that,” he said.

Phil Dorrell, director of Retail Remedy, said the problems Morrisons are facing are “numerous”. 

“The discounters are decimating its market share at one end and Waitrose at the other,” he says. 

“Add in a lack of leadership, an estate that lacks excitement, uninspired marketing, cautious consumers and an online strategy that is playing catch-up and you have a grocer with real problems.”