Morrisons boss feels the heat as sales slip away

Morrisons chief executive Dalton Philips is under pressure despite the move in to online and convenience stores sector. Picture: Newscast

Dalton Philips admitted that performance was unlikely to truly turn the corner until 2015 and said the growth of discount chains such as Aldi, Lidl and Iceland was “impacting everybody”.

Morrisons, which is pinning hopes on an expansion into online sales and the fiercely competitive convenience store market, said its low exposure to these areas “continues to impact sales performance”.

Figures today revealed that underlying sales, excluding fuel and VAT, fell 2.4 per cent in its latest quarter. The firm said that outcome was in line with its expectations, but the performance was worse than City predictions for a 1.7 per cent decline and weaker than the 1.6 per cent fall suffered in the first-half.

The group, which acquired Safeway almost a decade ago, sits behind Tesco, Asda and Sainsbury’s in the supermarket league table and recent industry data showed its market share had shrunk to around 11.2 per cent from 11.4 per cent a year ago.

Morrisons said it now has 69 “M Local” convenience stores after opening 36 during the quarter – a rate of three a week – with around half in London and the south-east of England.

It is on track to have 100 of the smaller outlets up and running by the end of the year with a further 100 planned in its next financial year.

The firm is launching its online food offer in partnership with internet grocer Ocado in January.

Philips has admitted the chain is two decades behind its competitors, which have had an internet presence since the 1990s.

Including the contribution from new stores, total sales were up 1 per cent in the group’s third quarter, covering the 13 weeks to 3 November.

Philips said: “We continue to grow our sales in this tough market whilst making great progress on our strategy to be a multi-channel retailer.

“I said at the outset that our online offer would be unmistakably Morrisons and I’m very confident that the service we unveil in January will live up to that promise.”

He said he was confident the business will record like-for-like sales growth in its November to early-February quarter, as it stacks up against a tough period a year earlier.

But Philips cautioned: “[Our] turning point will be 2015. We are strengthening our business. We are making key steps forward into these new growth channels [convenience and online].”

Analysts at brokerage Cantor Fitzegerald, which has a “sell” note on the stock, said: “Despite the extra advertising costs and store refurbishments, Morrisons is still losing the most market share and remains the weakest of the major supermarkets.

“Morrisons, we believe, should focus on developing its own brand products but in our view continues to suffer from a loss of shoppers to discounters due to its high duplication of shoppers with Aldi.”