Morrisons posted a 7.1% slump in like-for like sales in the first quarter, blaming a “continued” competitive market for supermarkets. Retail Week takes a look at the analyst reaction.
“This morning’s disappointing numbers show 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. 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 square feet. It is here where the real problem lies.” David Gray, Planet Retail
“Morrisons’ recent unveiling of a raft of price cuts might help stem the flow of shoppers deserting it for the discounters, after a few quarters of quite worrying like-for-like sales decline. Its communications around the price campaign have been by no means trouble-free, but the messaging is a decent mix of price and quality and could help shore up the chain’s overall value proposition. With a streamlined range in ambient and more focused promotions, Morrisons is enacting some sensible measures to create a more cohesive offer. Clearly, a lot will depend on how competitors react to the Morrisons price offensive, but we retain a degree of underlying optimism that, after what will be a tricky 2014, a leaner and stronger Morrisons will be back on track in 2015. Bryan Roberts, Kantar Retail EMEA
“Overall, these are a disappointing set of sales figures. These trading results reaffirm the need for management’s recent change in strategy. Last week, Morrisons announced price cuts on 1,200 products, of which approximately 35% to 40% on brand products. While we agree that the management team is making the right strategic changes, we think the plan is still too vague and we see lots of uncertainty about the team’s ability to execute the plan.” Bruno Monteyne, Bernstein
“If we take the Sainsbury’s comments yesterday, about current competitor price investments being mainly a realignment or catch-up, then we might not see that much of an sales improvement in Morrisons Q2. This, in our view, could place significantly greater pressure on Dalton Philips and his current strategy if his main competitor, Asda, is not needing to respond to Morrison’s price cuts.” Mike Dennis, Cantor Fitzgerald
“Although widely anticipated, the latest results from Morrisons are woeful. A 7.1% like-for-like sales slip, on the back of a 1.8% sales fall over the same period last year, represents an alarming deterioration in trade. It is also worth noting that the declines have worsened from those reported over the Christmas trading period. The present day grocery sector is punishing and the bottom line is that there is too much capacity relative to demand. The game now is one of market share stealing: any player that wants to grow has to take share from another. Unfortunately in this ‘zero sum game’ Morrisons is a clear loser and is ceding share not only to the deep discounters but also to other big four players.” Neil Saunders, Conlumino