Britain's crisis-hit supermarket sector claimed its first scalp of the year on Tuesday, as Wm Morrison ousted chief executive Dalton Philips following another plunge in Christmas sales at the country's fourth-largest grocer. Morrisons said it would almost certainly look outside the company for a leader to return it to growth after it lagged larger rivals Tesco, Wal-Mart's Asda and Sainsbury's under Philips's five-year watch.
Its shares jumped as much as 6.9 percent on hopes a new boss could reverse its fortunes. But analysts said there was a mountain to climb as all of Britain's "big four" grocers grapple with falling food price inflation and the rise of fast-growing discounters Aldi and Lidl. "If other members of the big four supermarkets are the squeezed middle, Morrisons is being steamrollered flat," said Phil Dorrell, director of retail consultants Retail Remedy.
Data on Tuesday showed all of the big four chains lost market share over Christmas, while more than half of households visited Aldi or Lidl over the period. Morrisons has been particularly hard hit because the discounters are strong in its northern heartlands and it was late to move to into better performing parts of the market, namely convenience stores and online shopping.
After a failed shift upmarket, Philips dramatically changed tack to take on the discounters in March with a massive profit warning and plans to slash prices. Some analysts said this, coupled with a focus on fresh produce supplied by its own farms and abattoirs, could help Morrisons recover under a new boss.
They said candidates could include Harriet Green, the former head of holiday firm Thomas Cook, and John Durkan, managing director of Australia's Coles. But Shore Capital's Clive Black said there could be more pain in store for shareholders in the form of a dividend cut in the next financial year.
"FRESH LOOK" Morrisons, which also said it would close 10 loss-making stores, delivered the worst Christmas performance of Britain's listed supermarkets for the second year running. Sales at stores open over a year, excluding fuel, fell 3.1 percent in the six weeks to January 4.
That was better than analysts' average forecast for a 3.8 percent fall and a third-quarter drop of 6.3 percent. But after a 5.6 percent decline last Christmas, which made the comparison base for this year's sales easier, the board decided the time was right for change.
"I think Dalton's had a good run ... It's a judgement call," chairman designate Andrew Higginson, a former Tesco finance director, who will succeed Ian Gibson as chairman on January 22, told reporters. "In essence we just feel it's time for a fresh look to try and regain some of that trading momentum," he said. He added Morrisons' strategy was "well cast", indicating it was unlikely to change significantly under the next CEO.
Gibson said Philips' exit did not indicate a dividend cut, stressing the firm remained committed to a 5 percent minimum rise for the 2014-15 year. Morrisons kept its profit guidance for 2014-15 and said Philips would stay in his role until year-end results in March. The firm's shares, down a quarter over the last year, were up 4.2 percent to 184.3 pence at 1310 GMT. Philips, whose strategy was lambasted by Ken Morrison, the son of the grocer's founder and a former boss, at the firm's annual meeting in June, said he was sad to be leaving and would take time out before deciding on his next move.
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