William Morrison Supermarkets Plc ousted Commercial Director Richard Hodgson after blaming a lack of shopper understanding of specialties such as in-store butchers and weak discounting programs for declining revenue.
Third-quarter sales at stores open at least a year fell 2.1 percent, excluding gasoline and value-added tax, the Bradford, England-based grocer said today in a statement. That compares with the median analyst estimate of a 2 percent drop. Sales on that basis fell 0.9 percent in the first half.
The retailer needs to combat the decline by putting out a “stronger message” on how it differs from competitors, such as producing and preparing fresh food items like beef and fish, as well as more effective promotions, Chief Executive Officer Dalton Philips said. Morrison’s market share fell to 11.5 percent in the 12 weeks ended Oct. 28 as sales slipped into negative territory behind the market’s growth of 2.4 percent, researcher Kantar Worldpanel said this week.
“The announcement today that Richard Hodgson is to leave the group after two years is, in our view, an effective admission that the business has made mistakes with its customer proposition,” James Collins, an analyst at Deutsche Bank in London, said in a report. He recommends buying Morrison stock. “A weak marketing program and confusion” over in-store offers and pricing “has been more of an issue.”
Morrison fell as much as 1.8 percent to 262.8 pence and was trading down 1.7 percent at 9:24 a.m. in London. The stock has dropped 19 percent this year.
The supermarket chain, which offers discounts such a “buy one, get two free” program, “has not maintained that leadership” in promotions in recent months, Philips said on a call with journalists this morning. “As the market intensifies and others have followed, we must remain ambitious, distinctive and creative,” he said.
“The weakened sales trajectory likely reflects a less differentiated brand positioning at a time when in-store standards have improved at peers,” said James Grzinic, an analyst at Jefferies International in London with a buy recommendation on Morrison.
“We expect the market to remain challenging for the remainder of the year,” while financial performance will be broadly in line with our expectations,’’ the retailer said today.
“We do things differently in terms of our craft skills, in terms of our vertical integration,” the CEO said. “It is totally unique in this market and we are not getting those points of difference across to our consumers.”
Hodgson is being replaced on an interim basis by Corporate Services Director Martyn Jones, who will focus on “how we communicate our points of difference in a more consistent manner and further improve the effectiveness of our promotional program,” Philips said.
Promotions, which typically account for about 40 percent of a consumer’s purchase, won’t be increased but communicated more effectively, according to the CEO.
Morrison has a strategy to “get back to offering innovative promotions that aren’t just immediately copied by competitors, so it’s not about promoting more, but promoting more effectively,” Finance Director Richard Pennycook said.
The supermarket chain has been revamping fresh-food formats with flower ranges and hot-food counters, while also ramping up discount vouchers like money off at the cash register and pushing into convenience outlets.
The fresh formats, with 100 planned by end of the year, have seen a sales uplift of between 4 percent and 6 percent, Philips said.