Reactions to the Morrisons results are flooding in from analysts, and we’ll update this piece as more comes in.
Phil Dorrell, director of retail consultants at Retail Remedy
“This is a rout, not a reversal. With the most dated stores and weakest business strategy of the old guard grocers, Morrisons has truly been put to the sword by the rise of Aldi and Lidl.
“The brand has haemorrhaged both sales and share to the brash young discounters who took its cheap prices USP, improved it, and then unceremoniously yanked the rug from underneath it. Next to the perky German upstarts it has increasingly looked neither cheap nor cheerful.
“Despite a modest pick up over Christmas, 2014 was a truly awful year for Morrisons - with annual pre-tax losses quadrupling to nearly £800m.
“The brand’s property portfolio is one of its few ‘get out of jail’ cards - and the £131m profit it made from dumping property assets was a rare bright point in a truly awful set of results.
“The new CEO David Potts, who starts on Monday, has a mountain to climb. He is a well-respected figure, and his pragmatic and detailed approach should challenge both the buying teams and the store teams to re-awaken the spirit of Morrisons, hopefully with a modern twist.
“Despite its multiple problems, Morrisons remains a solid business - or at least it would be if it could get its offer right. It needs an overhaul to convince people it is attractive again.
“The marketing over the last few years has been dire, and has done nothing to change its tired public image. The brand needs to be much bolder if it is to recapture the distinctive market niche that it created and then lost.”
David Gray, retail analyst at Planet Retail
“As anticipated, Morrisons has posted an improving, if somewhat subdued, like-for-like performance, suggesting recent measures like the price comparison loyalty scheme are beginning to bear fruit. Profits as expected remained in freefall, however, as Morrisons has been forced to join the rush towards EDLP.
“Even so, with a new Chairman at the helm in the form of retail veteran Andy Higginson, a Tesco veteran and David Potts, former Tesco Asia Chief, due to come aboard in a matter of days, the company has no shortage of talent to drive its future direction. Although a true recovery will take years, a steadier hand on the tiller is finally becoming a reality.
“Shelving plans for new M Local convenience stores – for now, at least - while sounding like bad news may ultimately help Morrisons stem the growing profit slide. With outlets yet to deliver a profit and the recent round of closures now largely finalised, clearly something had to give.
“As Planet Retail has stressed on numerous occasions, convenience is a hard battleground, despite the growth of the wider channel. Morrisons’ scattergun approach has proved less than ideal compared to the measured roll-out of rivals like Little Waitrose – which has had much greater success. We can only hope the next wave of diversification in which Morrisons engages will be far more considered.”
Himanshu Pal, director of retail insights at Kantar Retail
“The latest Morrisons’ results are a miserable welcome for incoming CEO David Potts who will have his work cut out to deliver a quick turnaround for the retailer. Morrisons’ is bearing the brunt of its £1bn investment in price reductions, which are spread across three years. It is now facing store closures and anxious shareholders who are likely to carry the burden of a reduced dividend pay-out in 2015.
While the figures are disappointing, it’s not all doom and gloom. Potts inherits a business that is relatively better placed in terms of its channels portfolio (convenience and online), a stronger supply chain and improved logistics to help compete against the Discounters and leading grocers. This all follows an improvement in sales performance for the retailer in Q4 2014, which reflected a market share which seems to have stabilised around 11%.”
Lewis Sturdy, dealer at London Capital Group
“Hope for change is already priced into the shares - already up 17% or 30p to 205p since the day it was announced Dalton Philips was going as CEO with Potts only due to start in the top job on Monday. To drive further share price growth from here on Potts still has a tough mountain to climb to turn around Morrisons, but it will likely be from a smaller overall store footprint.
”Annual underlying profits halved, somewhat as expected. Pre-tax profits on an underlying basis were down 52%, as they took a hit from a bit price cut campaign last year to fight the discounters. A future cut to the dividend is sensible given the price war underway which will eat further into margins. Having been very late to the party at the small store game, plans to close 23 “M local” stores are not however encouraging. The huge bottom line pre-tax loss has been caused by a big property write down, as Morrisons’ own most of their stores.”
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