Morrisons reported another quarter of disappointing results this morning, with LFL sales (excluding fuel) declining 6.8%. The decline in LFL sales is the worst across leading grocery chains in the UK and highlights the tough task Dalton Philips and his team at Bradford are facing.
Snapshot of results:
While there is little to cheer about Morrisons’ latest results, there is a sense of optimism as the rate of decline in LFL and market share is slowing. Although it is too early to pass a definitive judgement on the efficacy of Morrisons’ strategy, the retailer should be lauded for making bold but much needed moves. There has been clear and decisive action on pricing – a focus on EDLP rather than promotional activity. Furthermore, the recent launch of the Match & More scheme, which price matches against the discounters Aldi and Lidl, has been successful, with over one million members signed in a month.
Morrisons’ Market Share and Growth
Source: Kantar Worldpanel
In a market dominated by price, Morrisons’ £300 million investment towards price cuts appears to be making some headway. The retailer is not only closing the price gap on ASDA (as highlighted by the Grocer 33), but has also delivered a marked improvement on in-store experience and service. This will ultimately lead to an improvement in shopper perception.
Pricing Index based on Grocer 33 weekly shopping basket
Source: The Grocer
While there appears to be some light at the end of the tunnel for Morrisons (share price up 6.7% since this morning); getting over the line will be a challenge.
- Morrisons continues to focus on online and convenience expansion but still lags behind its peers in terms of scale (penetration) and capabilities to become a market leader.
- Despite its clarity on pricing, Morrisons still has one of the highest numbers of promotions among the top four grocers. The retailer needs to sustain momentum in improving shopper perception and continue to deliver customer satisfaction.
Promotional Basket (as % of total weekly basket) based on Grocer 33
Source: The Grocer