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Andrew Higginson Aldi Lidl

Morrisons wants to 'get back in tune' with customers as it continues to haemorrhage sales

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By Jennifer Faull, Deputy Editor

March 12, 2015 | 4 min read

Morrisons has recorded its worst result in nearly a decade and outlined plans to close a number of convenience stores as it continues to battle against the rise of discounters Aldi and Lidl. However chairman Andrew Higginson remains confident it can “get back in tune” with customers.

Sales plummeted 5.9 per cent in the year to 1 February compared to a 2.8 per cent decline the previous year. Profit before tax was down 52 per cent to £345m, marking the retailer’s worst performance for eight years.

Total losses amounted to almost £800m.

Higginson called the trading environment tough and added that he didn’t expect any changes for the year ahead.

Morrisons' convenience business “did not perform as expected” over the year and in the coming months it will close 23 unprofitable stores and slow down the pace of new store openings.

Its online proposition, which is in its first year of operation, was described as a startup and an area of focus when new CEO David Potts – who replaces the ousted Dalton Phillips – joins the business next Monday.

“Under his leadership, we will focus on building trading momentum and being more like the Morrisons our customers expect. We will invest more into the proposition and put customers at the heart of everything we do. We will listen and respond to our customers, and work hard every day to improve the shopping trip,” Higginson added.

Although Potts will be given “headroom” when he joins to plot a course for the ailing supermarket, Higginson said the strategy Morrisons embarked on last year based on a £1bn three year price-cutting plan remains in place. It delivered £224m of those savings last year.

“Sorting the business out is not about strategy, it’s about execution,” Higginson said, adding that success is about “getting back in tune with customers”.

“It’s a culmination of lots of different things that make customers want to shop with you and not anyone else. Modern marketing departments that are analytics based but I don’t think the shopping trip at Aldi and Lidl is any different than Morrisons.

“Service, price, deterioration of stores are all things that make customers feel like they don’t have permission to shop with us. We have to give that back. We have to make Morrisons sufficiently attractive,” he said.

“Success measures will be simple – more customers buying more from us. More customers means more volume growth which, ultimately, will lead to better like-for-like, profitability and shareholder returns.”

Details of how its Match & More loyalty card performed were not disclosed, but it will be used as a "mirror" moving forward to highlight products the retailer should discount.

"We will also begin to leverage the new Match & More data in many ways across our business, including more personalised offers for customers," Higginson said,

However. Phil Dorrell, director of retail consultants Retail Remedy, remains sceptical.

"Despite a modest pick up over Christmas, 2014 was a truly awful year for Morrisons," he said.

"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.”

Dorrell added that Potts will have a mountain to clib when he joins, but his reputation in the indsury as a pragmatic and detailed leader should challenge both the buying teams and the store teams to re-awaken the spirit of Morrisons.

"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.”

Andrew Higginson Aldi Lidl

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