Profits halve at Morrisons as screw turns on boss

Morrisons chief executive Dalton Philips could go the way of Tescos Phil Clarke. Picture: Getty

The grocery giant’s chief executive told investors yesterday: “As a chief executive you always feel under pressure to execute a big plan. You feel it acutely but I’m confident in this plan.”

Morrisons, which like major rivals Tesco and Sainsbury’s, has been squeezed by discounter competitors Lidl and Aldi, announced earlier this year that it would “invest” some £1 billion over three years in slashing prices.

Rivals have responded with their own price-cutting aggression, and new Tesco boss Dave Lewis is also expected to reduce prices more vigorously in a simplified offering.

Morrisons, Britain’s fourth-biggest and Scotland’s third-largest supermarket operator, revealed that same-floorspace sales slid 7.4 per cent in the half-year to 3 August.

Chairman Sir Ian Gibson conceded: “Conditions are tough, and the industry is going through unprecedented change.” Pre-tax profits dived 51 per cent to £181 million from £401m in the same period last year, on turnover down 4.9 per cent at £8.5bn.

But Morrisons, which has about 60 Scottish stores, said its turnaround programme – involving a more rapid rollout of convenience stores and an internet offering – was continuing.

“While like-for-like sales performance is yet to improve, there are some encouraging initial trends. Our initiatives are on track and we anticipate that these will start to benefit our sales performance towards the end of the second half,” the group said.

Tesco slashed its interim dividend by 75 per cent a fortnight ago. But Morrisons hoisted its interim payout by 5 per cent to 4.03p, and yesterday confirmed a commitment to pay a full-year dividend of not less than 13.65p.

Shares in the group, which have plunged more than 40 per cent in the past year, nudged up 1.2p to 177.8p. It has pledged to invest £300m in price cuts during its 2014-15 financial year, including its “I’m Cheaper” campaign, which cut 1,200 products by an average 17 per cent before a further 135 prices were reduced by 14 per cent in June.

The group said it was also focusing on more targeted promotional activity after the number of weekly items on promotion fell 13 per cent in the second trading quarter.

Regarding its online offer, where Morrisons is seen as a late participant, the retailer said it stuck by its targets for annual sales of £200m and 50 per cent coverage of UK households by the end of the financial year.

It opened 17 ‘M’ local convenience stores in the period, taking the total to 119, and said it expected to open up to 70 additional sites over the whole financial year and a further 100 next year.

Morrisons went £176m into the red in its last financial year, but said it expected to return to underlying profitability this year, giving guidance of earnings between £325m and £375m.

One food retailing analyst said: “These figures are not so bad as to mean it is curtains for Dalton Philips.

“But if we are not seeing stabilisation of sales by next spring, certainly by the summer, it might make his position untenable as Phil Clarke’s position became at Tesco.”