Morrisons to slash costs at its head office as sales slide further
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Version 0 of 1. Morrisons’ new boss, David Potts, has given his first assessment of just how big his task will be in turning around the struggling supermarket – and promised a review of the entire organisation. The decision comes as sales in the 13 weeks to 3 May fell 2.9 per cent and Morrisons said it will spend up to £40m in redundancy and restructuring costs after 720 workers were axed from the company’s Bradford head office. Morrisons also followed Sainsbury’s and added its voice to warnings that price deflation is set to continue for at least the next 12 months. Chief finance officer Trevor Strain said: “We acknowledge that food deflation will hit for a while.” Potts added that deflation had already had an effect, with prices dropping 4 per cent in the last year, and suggested they could fall even more as he returns Morrisons to its “traditional” lower prices. Since arriving, Potts said he has visited 90 stores, where he has been making sure more food is carried on the shelves and removing large posters and signage in order to give a brighter appearance. He added that stores are being cleaned more often than under the chain’s old regime, where former chief executive Dalton Philips attempted to save cash by cutting back on window cleaners. The retail boss, dubbed “Pistol Potts” after quick-fire cuts, said: “We are a food retailer and in order to be valued we need to be clean and tidy. Having high standards of cleanliness is what’s important to our customers.” The review will be presented at the half-year results in September, with Potts saying everything would be on the table including the recently introduced loyalty card which is the first to match prices against Aldi and Lidl. Online sales were performing well, according to the company, attributing 1 per cent to like-for-like sales. Bernstein analyst Bruno Monteyne said: “The task of repositioning Morrisons is much harder than for Tesco as it has less competitive advantages and it will take much longer than what currently is embedded in consensus margin expectations.” Morrisons said it anticipated underlying profit before tax in the 2015-16 year would be higher in the second half than the first. Finance director Trevor Strain said he was comfortable with analysts’ average full-year forecast of £356m but noted consensus had fallen from £387m in March. “We are very aware that there is a huge amount for us to do to turn this company around,” he told analysts. The firm also appointed Darren Blackhurst as group commercial director. He joins from B&Q and has worked for Matalan, Asda and Tesco. |