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| Price war fears wipe £2bn off value of UK supermarkets | Price war fears wipe £2bn off value of UK supermarkets |
| (about 1 hour later) | |
| More than £2bn was wiped off the value of the UK's listed supermarkets on Thursday as Morrisons said taking on discounters such as Aldi and Lidl with aggressive price cuts would slash profits by more than 50%. | |
| Fears that Tesco and Sainsbury's would also be forced to slash profits to deal with cut-price rivals dragged down their shares by 4.9% and 8.4% respectively. Shares in the online grocer Ocado, which delivers food for Morrisons, and Marks & Spencer also took a hit. | Fears that Tesco and Sainsbury's would also be forced to slash profits to deal with cut-price rivals dragged down their shares by 4.9% and 8.4% respectively. Shares in the online grocer Ocado, which delivers food for Morrisons, and Marks & Spencer also took a hit. |
| However, Morrisons shares posted the worst performance in the FTSE 100 as a second profit warning in three months triggered a 12% slump. | However, Morrisons shares posted the worst performance in the FTSE 100 as a second profit warning in three months triggered a 12% slump. |
| Morrisons has been hammered by a sea change in shopping habits. It has been stranded as consumers turn away from large out-of-town outlets to online purchases and convenience stores. The grocer is also suffering because it is no longer viewed as one of the cheapest places to shop, it has out-of-date IT systems, no loyalty card and too many shabby stores. | Morrisons has been hammered by a sea change in shopping habits. It has been stranded as consumers turn away from large out-of-town outlets to online purchases and convenience stores. The grocer is also suffering because it is no longer viewed as one of the cheapest places to shop, it has out-of-date IT systems, no loyalty card and too many shabby stores. |
| In a new turnaround strategy, the Bradford-based grocer said it would sell off £1bn of property assets over the next three years to help fund its dividend. Savings and efficiencies also equal to £1bn will be invested in price cuts, promotions and store improvements over the same period, starting with £300m this year. | In a new turnaround strategy, the Bradford-based grocer said it would sell off £1bn of property assets over the next three years to help fund its dividend. Savings and efficiencies also equal to £1bn will be invested in price cuts, promotions and store improvements over the same period, starting with £300m this year. |
| Meanwhile, Morrisons is to pull out of expensive adventures into the children's clothing brand Kiddicare at a cost of £163m as well as the US online grocer Fresh Direct. | Meanwhile, Morrisons is to pull out of expensive adventures into the children's clothing brand Kiddicare at a cost of £163m as well as the US online grocer Fresh Direct. |
| Despite the multibillion pound announcements, the fightback was overshadowed by the profit warning. The company admitted profits would fall to between £325m and £375m in the year to February 2015. Analysts had expected a profit of about £732m for this year. | Despite the multibillion pound announcements, the fightback was overshadowed by the profit warning. The company admitted profits would fall to between £325m and £375m in the year to February 2015. Analysts had expected a profit of about £732m for this year. |
| That follows an already tough year, which saw Morrisons post an underlying pretax profit of £785m for the year to February 2014 – down 13%, but in line with analysts' depressed expectations. Revenue fell 2% to £17.7bn. | That follows an already tough year, which saw Morrisons post an underlying pretax profit of £785m for the year to February 2014 – down 13%, but in line with analysts' depressed expectations. Revenue fell 2% to £17.7bn. |
| Dalton Philips, Morrisons' embattled chief executive, said the grocery sector was undergoing its biggest upheaval since supermarkets emerged in the 1950s, with business moving online and the squeeze on living standards boosting the appeal of low-cost German upstarts Aldi and Lidl. | Dalton Philips, Morrisons' embattled chief executive, said the grocery sector was undergoing its biggest upheaval since supermarkets emerged in the 1950s, with business moving online and the squeeze on living standards boosting the appeal of low-cost German upstarts Aldi and Lidl. |
| "We overlap with the discounters more than anybody else, our customers have felt the austerity programme more than anybody else and these are bold steps to put us back on track. | "We overlap with the discounters more than anybody else, our customers have felt the austerity programme more than anybody else and these are bold steps to put us back on track. |
| "This is the right plan for this business in this landscape. We can't ignore this structural shift," Philips said. | "This is the right plan for this business in this landscape. We can't ignore this structural shift," Philips said. |
| He admitted that even with the price cuts it would take time for Morrisons to see underlying sales growth again. "I'm obviously not going to forecast when," he said. | He admitted that even with the price cuts it would take time for Morrisons to see underlying sales growth again. "I'm obviously not going to forecast when," he said. |
| In an attempt to win over shareholders, Morrisons promised to increase its dividend by 5% this year, and said it would return more capital to investors in future. The 2013 payout rose 10% to 13p. | In an attempt to win over shareholders, Morrisons promised to increase its dividend by 5% this year, and said it would return more capital to investors in future. The 2013 payout rose 10% to 13p. |
| Asked how long the board would give him to turn the company round, Philips, who joined Morrisons four years ago, said he had dealt with gaps in convenience and online trading and upgraded the "antiquated" computer systems he inherited. "I've addressed all three of the first [problems] and now I am addressing the discounters," he said. | Asked how long the board would give him to turn the company round, Philips, who joined Morrisons four years ago, said he had dealt with gaps in convenience and online trading and upgraded the "antiquated" computer systems he inherited. "I've addressed all three of the first [problems] and now I am addressing the discounters," he said. |