RETAIL analysts have expressed their concern that the vigour and ambitions of David Potts and the rest of Morrisons’ new management team might not be enough to solve to retailer’s problems.
“Although Potts is doing everything in his powers to turn it around, Morrisons’ problems are almost certainly too deep-seated,” said John Ibbotson of the retail consultants, Retail Vision.
“Selling 130 convenience stores to a venture capitalist might give Potts some breathing space, but why sell the only growing part of the business and the bit with the most market potential?
“Potts is in a battle and with the disposal of his convenience stores, he just threw away his archers.”
Mr Ibbotson pointed to the “high cost internet operation” run by Ocado as one of the challenges in trying to reduce the cost base to enable it to match Aldi and Lidl as well as the difficulty in playing catch-up in a tough marketplace.
He added: “Morrisons has consistently been behind the game. Late to online and with a high cost operation, late to convenience and then selling out, late expansion in the rich south and now under threat from the discounters in its northern heartland.
“Morrisons says in its latest results that the turnaround will take time, but how much time has it got? This is a retailer that is ripe for takeover.
“Selling 140 convenience stores at a loss and closing 11 supermarkets, David Potts is downsizing Morrisons. But is he doing enough to restore profitability and how long has he got before someone else steps in?”
Phil Dorrell, partner at Retail Remedy, agreed that the clock is already ticking, despite Mr Potts having been in post for less than six months.
“Time is of the essence and a poor Q3 trading would put them in a very weak position so we will be watching for some quick decisions from Potts in the coming weeks,” he said.
The sale of M Local, which he described as “the leaky bucket”, should help the retailer’s future profits look healthier, the sale was a “disappointment” because it generated just £25m and left the retailer with a £30m bill. But for Mr Dorrell Morrisons’ convenience stores were just one problem of many.
He added: “Potts still has a long to-do list which just continues to get longer rather than shorter. With every trading update comes more pressure to turn the retailer’s fate and deliver some good news.”
