What Next For Morrisons?

Morrisons is facing a fight if it wants to hold onto its place among the UK’s biggest supermarkets. Where can it go from here? …

With Tesco at the top of the pile and its next three rivals all clinging to take second best, the UK supermarket landscape had looked relatively stabled in the years before the financial crisis. But as the credit crunch took hold, discount retailers began to take more of the lower-end custom, while luxury brands like Waitrose have siphoned off sales at the other end of the price scale. Amongst this change, Morrisons has become one of the biggest casualties.

When its annual results are published on Thursday (March 13th), Morrisons is expected to post a fall in profits of as much as 17 per cent before tax. That’s a huge drop in the space of a year, and at £731 million it could amount to the smallest profits in five years. A drop in like-for-like sales of more than five per cent over the crucial Christmas period did little to help. It seems like the company – which is celebrating a decade since its confidence was at a peak after the acquisition of Safeway – is losing its grip on the market.

In the squeeze being placed on the “big four” it seems that Morrisons, which is smaller than Tesco, Sainsbury’s and Asda, has suffered the most. New market share data from Kantar WorldPanel shows that Waitrose and the discount stores of Aldi and Lidl have taken 3.5 share points from their competition in the past three years, which amounts to £4.4 billion in lost sales. Morrisons lost 0.7 share points, meaning it now controls just 11.1 per cent of the market overall.

Much of the damage was done by Morrisons’ refusal to join the rush towards online shopping until it was too late. By the time it eventually started to offer home deliveries in a limited number of locations in December and January, plenty of customers had already flocked to its competitors. It will have to work hard to bring those shoppers back and emphasise the quality of its service.

Morrisons has already vowed to start price-cutting in a bid to compete with its three major rivals, but as a smaller company there is a risk it will not be able to make it to the end of a race to the bottom. It’s also selling off £500 million in property assets to free up some capital – it owns far more of its premises than Tesco or Asda. But whatever is in store for the embattled supermarket, it’s clear Morrisons has a fight on its hands.