Nick Bubb's verdict: Morrisons' David Potts aims to stop shoppers voting with their feet

Morrisons recently elected to change their leader, but Dave Potts needs to come up with something insightful to get customers to vote for him.

Back on January 13, with the better than feared Christmas trading statement, Morrisons announced that chief executive officer Dalton Philips would be stepping down and on February 25 they said that, as had been widely expected, the former Tesco stalwart David Potts would be joining the company on March 16 to take on the leadership role and bring a fresh pair of eyes to their predicament.

Today’s first quarter update from Morrisons (covering the 13 weeks to May 3) was Dave Potts’ first opportunity to give his first impressions of the business, seven weeks in and at first sight the new chief executive officer didn’t seem to have much to say, confining himself to bland comments like “my initial impressions from my first seven weeks are of a business eager to listen to customers and improve”.

“What exactly was the business doing before, if not listening to its customers?”

Nick Bubb

The lame reference to “listening to our customers” comes straight out of the Dave Lewis playbook at Tesco, but begs the question of what exactly the business was doing before, if not listening to its customers…

After all, the much-maligned Dalton Philips would have said much the same and in fact did so less than six months ago, back in November, when analysts were taken up to Bradford to see a revamped store and a manufacturing plant, hear about the new loyalty card and meet the new operational management team.

No strategic update

Six months on and much of that Morrisons management team has been swept away by the new boss’s broom, as part of the swinging job cuts at headquarters, and a new team is being assembled, with, for example, the well-travelled Darren Blackhurst appointed today as the new trading director.

The upshot, however, is that there will be no new strategic update until the Morrisons interims in September, but, to be fair, Dave Potts did provide some more insight on the conference call with the City analysts this morning.

Dave Potts told the analysts that he wants “a simpler, leaner and more cost-conscious business that can act with speed”, which sounds fair enough, although you’d have thought that cost control has always been one of the strengths of the business.

“Morrisons is a genuine British underdog.”

David Potts

After describing measures to improve customer service and the shopping experience, he went on to say, more promisingly, that Morrisons is “not a 1-club golfer” competing only on price and that Morrisons is “a genuine British underdog”.

How Morrison’s communicates more clearly some of its unique attributes, like its in-house fresh food manufacturing operation, remains to be seen, but Dave Potts did sound genuinely excited about the advantage of controlling the sourcing of half its fresh food range.

Disappointing first quarter results

Meanwhile, the first quarter saw another disappointing fall in like-for-like sales of 2.9%, despite weak comps (sales were down by 7.1% like for like at this stage last year) and despite a 1% sales boost from online grocery growth, although some of this was self-inflicted (less vouchering activity going on) and there are tentative signs that some of the measures to improve customer service are helping the business.

And the forward-looking guidance, although strangely cryptic (what does it mean that second half profits will be higher than first half profits?) sounded downbeat, with talk of a potential need for more investment in lowering prices and for the top end of the range of City profit forecasts to edge down.

No doubt this explains why the Morrisons share price has fallen sharply today by about 7% (on, admittedly, a bad day in the overall stock market).  

After all, Mike Coupe of Sainsbury’s also said yesterday that price deflation in the industry will continue for the foreseeable future and that industry profitability will be permanently lower in the future.

And many of Morrisons customers are voting with their feet in their northern heartlands and going off to shop at Aldi and Lidl instead. Can Dave Potts convince them that it is worth voting for Morrisons instead simply because the business manufactures much of its fresh food?

• Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos Retail Think-Tank.