Morrisons has reported pre-tax losses of £176m as it reveals plans for a major restructuring of the business.
The embattled grocer recorded the losses for the year to February 2, against pre-tax profits of £879m the year before.
Morrisons said it plans to exit Kiddicare, the online maternity specialist it acquired in 2011 for £70m. Morrisons said it is “a business whose performance has been disappointing and which is no longer strategic. We will look to sell this business in 2014”. It also seeking to exit Fresh Direct in the US.
The retailer was hit by a one-off £903m exceptional write-down, due to property and IT costs and a disappointing performance from Kiddicare.
Morrisons said it expects the challenging consumer and market environment to “persist through the coming year”. As such it expects underlying profits in 2014/15 to be in the range of £325m to £375m, less than half the underlying profit it achieved last year, which came in at £785m.
Turnover fell 2% to £17.7bn while like-for-likes excluding fuel fell 2.8%.
The retailer plans to invest £1bn in the business in the next three years to improve efficiencies and lower prices to counter the growth of the discounters.
Morrisons chief executive Dalton Philips said the grocer “must address the other key structural development in the market, discounter growth”. “This is an issue which is affecting us and all the traditional grocery players. Consumers have started to shop the discounters in the same way they would a traditional supermarket – their perception of them has changed.
“Price is not the only determinant of store choice, but it is the most important factor. Whilst Morrisons offers so much more by way of the provenance and range of its fresh food, in-store craft skills and great service, it is essential that in pricing terms, we are close to the market leader.”
Morrisons launched its online offer in January in partnership with Ocado and said it is performing “ahead of plan”. The retailer said that during the year it will trial an innovative click-and-collect format.
Philips said: “The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail.
“We are significantly reducing our cost base and will invest £1bn into our proposition over the next three years, to improve our value even further and to defend and strengthen our competitive position. Customers will see this in our stores as well as in our fast growing online and convenience offers. At the same time we will exit non-core activities, significantly reduce our capital expenditure and deliver improved operating cashflow and return on capital employed.
“Together with the strategic value of our vertically integrated supply chain, these measures will provide a firm foundation from which to provide outstanding value to our customers and to generate meaningful shareholder returns over the medium term.
“I’m confident that Morrisons will emerge from this period of necessary change as a more focused, more distinctive value leader and well positioned to compete sustainably in the new grocery landscape.”