Morrisons Plots Price Cuts After Annual Loss
Morrisons has launched a counter-attack in the supermarket price war after losing more than just ground to its rivals in its last financial year.
The chain, which has struggled amid strong challenges from discounters and because of its slow response to the online grocery and convenience markets, confirmed a pre-tax loss of £176m for 2013/14 after profits of £879m in the previous 12 months.
Like-for-like sales fell 2.8% in the period.
The £176m annual loss was largely explained by a £903m writedown relating to the value of its stores and its purchase of online children's wear retailer Kiddicare, which it now plans to sell following a poor financial performance.
Its share price fell 10% on opening on the FTSE 100 in response to the figures, with its plans to turn its fortunes around seemingly failing to impress.
Sainsbury's and Tesco also saw steep falls in their values because of the implications of the price war, with Tesco having fired a new salvo the previous day with a fuel offer.
Morrisons said a £1bn programme of property disposals over three years would fund a major investment in its customer offer.
There would be £300m spent on its proposition during the current financial year and it would also introduce a loyalty card.
Chief executive Dalton Philips said Morrisons was investing the money to improve value and "defend and strengthen our competitive position," suggesting the grocery sector was facing its biggest structural shift since the 1950s.
The Yorkshire-based chain has been losing sales to hard discounters Aldi and Lidl faster than the rest of its so-called "big four" rivals.
In its annual results, it said of the discount market challenge: "It is currently worth £9.5bn (up 20%) over the prior year.
"This reflects a fundamental shift in the market and one that is likely to be structural rather than cyclical.
"It is a challenge we will address in 2014/15."
Morrisons also said it would do more to engage in the convenience sector as shoppers adopt more of a "little and often" approach at the expense of big basket weekly shops.
Its online grocery offer, in partnership with Ocado, only began at the start of the year.
However, Mr Philips said it was already producing market-leading performance for on-time deliveries and a low rate of substitutions.
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