Morrisons’ turnaround strategy: David Potts’ six-point plan to revive the grocer

1. Be more competitive

First on the list for Morrisons is a focus on stepping up to the competition. The retailer said it pumped over £300m into being more competitive last year and it intends to surpass that amount this year – it has already invested £181m in the first half.

While its policy on cutting prices will continue, it stated that “competitiveness is not just about price”, adding that it will strike the “right balance of price, coupons and promotions” and will review its Match & More loyalty scheme. Promotions will be simpler and clearer, and promotions will be fewer and more impactful.

2. Bolster customer service

Second on the hit list is improving customer service. Morrisons has hired 5,000 in-store staff and brought in more employees at the busiest times of the week. It also plans to introduce express checkouts across all stores and aims to replace and upgrade checkouts in all stores for Christmas.

Future initiatives include reorganising its wine sections by colour and country of origin in the next few weeks and revamping its produce departments.

3. Tailor stores to local tastes

Morrisons wants to personalise the shopping experience by tailoring each store’s offer to local tastes and demographics. The grocer says: “A core offer will apply for each store, with managers given autonomy to flex outside the core to best suit local customers.”

The retailer will also introduce more local marketing as it looks to fulfil ambitions for stores to become “centres of the local community”.

4. Introduce third-party services

Morrisons plans to follow rivals in utilising extra space by providing third-party in-store or on-site services as it looks to boost footfall to its stores and “generate income and enhance returns”.

However, Bernstein senior analyst Bruno Monteyne, who describes this plan as the “one material new element on the strategy”, notes that Morrisons’ approach differs to Tesco’s in that it is a “capital light way (licensing fees, royalty streams, etc) rather than the old Tesco strategy under Philip Clarke of adding more capital to the business”, pointing to the grocer’s Giraffe and Harris & Hoole purchases.

5. Simple and tighter management

Morrisons says it wants to become more agile and responsive, which has meant it has removed many management layers and restructured its head office. “This smaller team will have greater responsibility and accountability for bigger areas of the business,” says Morrisons.

6. Accelerate store refits

Morrisons says its strategy to get all of its stores to a consistent standard will be complete by the end of October.

The retailer will speed up its refit programme, with plans to upgrade its store estate by end of 2018/19.

The analyst reaction

Bruno Monteyne, senior analyst at Bernstein: “All of this is sensible and the setup of the strategy is bullish, with a definitive claim that it will deliver improvements on the offer and will deliver profit growth, enhance earnings per share and enable them to grow the dividend. However, the key phrase is that this will take time.”

James Collins, analyst at Stifel: “The message is broadly as expected – with a focus on fixing the basics and confirmation that changes will take time. There is a reiteration that investment in the proposition will be stepped up this year but no details on the profit impact of this and no indication of the need for a margin reset.”

Clive Black, analyst at Shore Capital: “In defining new priorities for the business, management seeks to fundamentally deliver a better shopping experience for its customers. Re-engineering Morrisons is not rocket science but it remains a considerable challenge and opportunity.”