Chain on a 'long journey'
Morrisons to close 11 supermarkets as profits take a tumble
Consultation has begun with the 900 staff affected.
Pre-tax profit fell by almost half and turnover was down by 5% for the first half the year and the group has hired two non-executive directors to help strengthen the board.
Mr Potts (pictured), who took over earlier this year, has already announced the sale of 140 loss-making convenience stores and admitted today the group faces “a long journey” to recovery.
“Morrisons will be an organisation that listens,” he said. “During the first half, the new executive and leadership teams have been listening hard to colleagues, customers, suppliers and shareholders. They tell us there is a lot for us to do.
“The immediate priority is to deliver a better shopping trip to stabilise trading performance. Our six strategic priorities will then deliver improvement in the core supermarkets, where we have the greatest opportunity.
“It will be a long journey. We approach the challenge with energy, confidence and many strengths, particularly our strong balance sheet and cash flow, which enables investment in improving the customer shopping trip.”
Andrew Higginson, chairman, added: “David has very quickly formed a new team that combines the best of Morrisons home grown and external talent. I am also delighted that two new non-executive directors – Belinda Richards and Irwin Lee – have recently joined and strengthened the Board. They bring a wealth of experience, which will prove invaluable to Morrisons.
“During the first half, the team has made good progress in starting the turnaround journey. Whilst the management team need time to settle in, make the changes they see as important, and build trading momentum, I believe the team will deliver much improved profits and returns for shareholders.”
Like-for-like sales excluding fuel and VAT were down 2.7% and total turnover down 5.1% to £8.1 billion. Underlying profit before tax fell 35% to £117m. Profit before tax was £126m (2014/15: £239m).
An interim dividend of 1.5p was declared.
As previously guided, the group expects underlying profit before tax will be higher in the second half of 2015/16 than the first.
John Ibbotson of the retail consultants Retail Vision said: “Although Potts is doing everything in his powers to turn it around, Morrisons’ problems are almost certainly too deep-seated.
“Selling 140 convenience stores to a venture capitalist might give Potts some breathing space, but why sell the only growing part of the business and the bit with the most market potential?
“Potts is in a battle and with the disposal of his convenience stores, he just threw away his archers.
“Swinging the axe on his executive board, culling 720 head office jobs, hiring 5,000 additional shop floor staff and reducing prices is clearly not enough to bring his cost base in line with the low cost discounters, Aldi and Lidl. Having a high cost internet operation run by Ocado doesn’t help either.
“Morrisons has consistently been behind the game. Late to online and with a high cost operation, late to convenience and then selling out, late expansion in the rich south and now under threat from the discounters in its northern heartland.
“Morrisons says in its latest results that the turnaround will take time, but how much time has it got? This is a retailer that is ripe for takeover.
“Selling 140 convenience stores at a loss and closing 11 supermarkets, David Potts is downsizing Morrisons. But is he doing enough to restore profitability and how long has he got before someone else steps in?”