Philips stands firm on Fresh drive

Philips stands firm on Fresh drive

Morrisons has admitted it needs to strengthen its marketing message and promotional mechanics to win over consumers and reverse declining sales trends.

The company today (8 November) announced the departure of commercial director Richard Hodgson as it unveiled a 0.4% drop in third-quarter sales, excluding fuel.

Commenting on the move during a conference call, chief executive Dalton Philips said Hodgson will temporarily be replaced by "retail heavyweight" and Morrisons corporate services director Martyn Jones.

Jones will be tasked with improving Morrisons' marketing message, ensuring the group communicates its points of difference and improving the effectiveness of its promotional tools.

"Morrisons is genuinely different," Philips insisted. "We have a vertically integrated supply chain... we champion craft skills... and we do this while offering value to our customers."

The company said its newly-opend or refurbished Fresh format stores had performed ahead of the core portfolio, with sales meeting the target of a 4-6% gain. Philips attributed this strong performance to the strength of the offer, which, he said, "resonates with what consumers want".

"We haven't been shouting our points of difference... when you walk into these Fresh stores you can really see the difference," Philips emphasised. "What we need to do now is communicate that we are different: that the butcher from your local high street is now in your local Morrisons."

However, according to Shore Capital analysts, the gulf between the performance of the Fresh stores and Morrisons core portfolio underlines the difficulties the retailer is grappling with.

"Morrisons has reported a Q3 like-for-like sales performance (ex-fuel and VAT) of -2.1%. We point out that this figure includes inflation and the uplifts from the conversion of stores to the fresh format proposition (35 were completed in the period) and so implies a materially weak volume picture. If such fresh format stores are delivering planned sales uplifts then the performance of non-converted Morrison outlets is likely to be that bit weaker still - LFL volumes may be down by 4-5%," the analysts wrote in a note to investors.  

Philips was quick to rebuff concerns Morrisons was not appealing to its core shopper by attempting to move upmarket. "We are a value retailer. We are not taking the brand up market. Our price positioning is strong."

According to Philips, the migration of shoppers away from its core store base can be attributed to "float" shoppers, who are not loyal to a retailer and shop purely on price and promotional offers. Morrisons "needs to hook them back in" by communicating the group's value message.

"Value is about price and quality and that is what we need to fight in," Philips insisted.

The company said it has a "loaded" Christmas offer, with promotions centring on its Christmas Collector Card. However, Philips added the changes to marketing and promotional activity would become more evident moving into the first quarter of next year.