Blog: Heat rises at Morrisons

Katy Askew | 28 April 2014

Morrisons management may be feeling the heat today (28 April) after a scathing attack on strategy from a former director made weekend headlines.

A disappointing performance has seen Morrisons investors grow restless as they await the results of management's strategy to develop its online and convenience offering. Last month the group racked up a pre-tax loss of GBP176m on a near-3% drop in like-for-like sales.

Morrisons management, under CEO Dalton Philips and chairman Sir Ian Gibson, has insisted that its weak sales performance is largely due to its under exposure to the growth areas of the UK grocery scene.

However, 22-year Morrisons boardroom veteran Roger Owen told the Yorkshire Post that the group's issues stem from its failure to reverse the tide of shoppers flocking to discounters such as Aldi and Lidl.

Owen suggested Morrisons needs to be more aggressive in the fight against the discounters - cutting prices in a similar strategy to that employed to see off the threat from KwikSave in the 1990s.

"We maintained the standards, we looked at the prices. We have got the winner against any of these: it is called product range - it's massive," Owen said. "You have got far more choice in a Morrisons store than you will have in any of the discounters, ever. So why be frightened of them? Take them on, get in there."

While Owen believes Morrisons is failing to do what it needs to in terms of pricing, he also claimed the group is not executing its turnaround initiatives effectively.

In the rush to expand in convenience, for instance, Morrisons is failing to select appropriate locations, he argued. If this is true, Morrisons is likely to pay a heavy price. As has been proven time and again in the convenience sphere, even being on the wrong side of a tube station in London can have disastrous impact on footfall.

Owen classed Morrisons as a "supertanker heading towards an iceberg" and called for management to step aside.

Similar murmurings look likely to grow in volume as discontent continues to mount an Morrisons management is likely to feel even more pressure to perform - or pay the piper.