When Morrisons updates on half-year trading next Thursday, the City will be looking for further evidence that its turnaround efforts are working.
Boss David Potts, the former Tesco man who spent 38 years at Britain’s biggest retailer, has not wasted any time since taking the reins at the Bradford-based grocer in March last year.
Starting with a cull of senior managers and head-office staff, Potts has also overseen a sale of its convenience business, store closures, a tie-up with Amazon and an extended deal with Ocado in a bid to boost its ecommerce offer.
On the trading side, Morrisons has improved its quality and ranging as part of a back-to-basics approach and is trialling a new-look type of store. It has also just pressed the button on a new round of price cuts, slashing the price of 160 products as part of its relaunched Price Crunch initiative.
Potts also last month recruited former Asda executive Barry Williams to boost its trading operations.
‘Much to do’
In reality, Potts had little choice but to act quickly.
Morrisons has often been seen in the past as playing catch-up to its rivals but some of Potts’ initiatives, such as the tie-up with Amazon, prove that he is a smarter strategist than some may have previously given him credit for.
But as Potts said himself in May, there is still “much to do”.
Despite a 0.7% rise in like-for-likes during its last quarter, latest Kantar data revealed that Morrisons’ market share had slipped year-on-year to 10.6%.
“Potts, who started his retail career as a 14-year-old at a Manchester greengrocer, appears to have some leeway for now”
Meanwhile, discounters Aldi and Lidl continue their impressive growth, while Co-op continues to grow sales at a strong clip.
Asda, which sits above Morrisons with a 15.7% share, is also expected to embark on another round of price cuts in a bid to regain a bigger slice of the market.
Potts, who started his retail career as a 14-year-old at a Manchester greengrocer, appears to have some leeway for now.
At the time of his appointment, Morrisons chairman Andy Higginson admitted the turnaround of the chain is likely to take up to five years.
It will do no harm, either, that Higginson and Potts have a long history from their days together at Tesco.
On the up
From a City perspective, investors will have been cheered this year by Morrisons’ return to the FTSE100, as it share price rallied 30%. After a dip in June and July, it is once again on an upward trajectory.
“But as Sainsbury’s diversifies its offer with Argos and Habitat, Tesco shows ongoing signs of recovery and the discounters roll on, there is little room for complacency”
But Potts will be well aware that he will have to think of new ways to outfox his rivals. Those are likely to centre around playing to the retailer’s strengths, such as its vertically integrated supply chain.
But as Sainsbury’s diversifies its offer with Argos and Habitat, Tesco shows ongoing signs of recovery and the discounters roll on, there is little room for complacency.
Potts’ beloved Manchester City have cemented their position among English football’s ‘big four’ despite emerging competition from the rest. Can Potts continue to do the same for Morrisons in the dogfight of the grocery sector?
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