Morrisons hit by £1.3bn property writedown and will shut 23 stores
MORRISONS today drew a strong line under the reign of Dalton Philips announcing it will close 23 of its under-performing convenience stores and vowed to return to its roots.
The annual review for the Bradford-based supermarket group ran to more than 4,000 words but two were absent – “Dalton Philips” – although the presence of its former chief executive, who left last month after five years in charge, could be felt in almost every paragraph.
The markets had already been prepared for the bad news in today’s results, which covered the year to February 1, with sales down nearly £900m to £16.8bn and underlying pre-tax profits down more than half to £345m.
Property impairment charges of £1.27bn were also announced as chief financial officer Trevor Strain unveiled “enhanced disclosure around commercial income and more detail on depreciation”.
It did not quite match the scorched earth policy of Tesco’s new chief executive Dave Lewis – who started his reign by releasing a barrage of bad news – but then Morrisons have suffered from already airing many of its problems in the last couple of years.
It was slow to get into convenience shopping and online, and sales were badly hit by its weak response to the growth of value retailers, while just last week its former group treasurer was jailed for insider trading and another former member of staff appeared in court on fraud charges.
Mr Philips suffered from public criticism of his strategy and competence by Sir Ken Morrison while the now-removed misting machines for the fruit and vegetables came to symbolise how little the supermarket understood what its customers wanted.
Andrew Higginson, Morrisons’ newly-appointed chairman, will reverse that by returning the supermarket to its origins and focusing on customers’ needs.
“Not all supermarkets are the same,” he said. “Morrisons is the most distinctive of the Big 4. We manufacture much of our fresh food and Morrisons Brand product – in meat, produce, deli, fish and bakery – in factories that we own and operate ourselves in the UK. This is unique and gives Morrisons a flexibility, speed-to-market, and provenance not available to our competitors.”
That strategy will be led by his former Tesco colleague David Potts, who joins on Monday and will need to reverse the company’s fortunes quickly in a very competitive sector.
Mr Higginson added: “Last year’s trading environment was tough, and we don’t expect any change this year. However, Morrisons is a strong, distinctive business – we own most of our supermarkets, have strong cash flow, and are famous with customers for great quality fresh food at low prices. This gives us a good platform.
“David Potts joins as chief executive next week. Under his leadership, we will focus on building trading momentum and being more like the Morrisons our customers expect. We will invest more into the proposition and put customers at the heart of everything we do. We will listen and respond to our customers, and work hard every day to improve the shopping trip.
“Success measures will be simple – more customers buying more from us. More customers means more volume growth which, ultimately, will lead to better like-for-like, profitability and shareholder returns.”
Some of its M local stores have been subject to that “simple” test and will be closed for failing to achieve sufficient sales. It opened 57 and closed six last year and currently has 153 convenience stores, but will close 23 that are not performing during this financial year. However the long-term plan is to continue to grow its convenience offer.
“Convenience is a channel that we expect will continue to grow in future,” he added. “Over recent years, we have been working to grow M local at pace in order to quickly gain critical mass and learn. However, for stores now in their second year, we are not seeing the level of trading performance we had anticipated.”
