Morrison CE0 Vague on Plans for Revival as Sales Drop Persists

Wm Morrison Supermarkets Plc’s new Chief Executive Officer David Potts gave few indications Thursday of how he plans to revive the struggling U.K. grocer after revealing a 13th straight quarter of declining same-store sales.

Potts, who started in the job seven weeks ago, spoke of improving service, availability and in-store cleanliness, though left questions unanswered on the possibility of further price cutting and whether more stores will need to close.

“Dave Potts doesn’t have much to say for himself,” said Nick Bubb, an independent retail analyst in London. “The guidance, although cryptic, sounds downbeat.”

Morrison has been one of the biggest losers from a price war among British supermarkets, posting two years of losses as a 1 billion-pound ($1.5 billion) price-cutting program failed to revive sales. Former Tesco Plc executive Potts is undertaking a full review of the business and promised to provide a more detailed update at the time of September’s first-half results announcement.

“We aim to be a simpler, leaner and cost-conscious business that acts at speed wherever possible,” Potts said on a conference call Thursday, also announcing the appointment of a new commercial director. “We’ve been listening hard to find ways to improve the shopping trip for customers.”

His words failed to inspire the shares, which fell 2.1 percent to 176 pence at 9:23 a.m. in London after adjusting for the stock trading without the right to a 9.62 pence dividend.

Morrison said it expects underlying pretax profit to be higher in the second half of the financial year than the first.

Falling Sales

The grocer also reported little change in sales patterns during the last quarter as declines persisted in the face of discount-led competition. Sales at stores open at least a year fell 2.9 percent, excluding fuel, in the 13 weeks ended May 3. That compares with the prior quarter’s 2.6 percent drop and the median estimate of 13 analysts for a 2.8 percent decline.

The supermarket operator ended the quarter better than it started it, Finance Director Trevor Strain said on the call.

Customers have responded to measures such as improving the cleanliness of stores, Potts said. Part of that effort has involved removing some sales displays and hanging signage. The company said in March it plans to close 23 smaller outlets.

To help boost staff morale, Morrison has switched off a system that measured the number of customers entering a store and instructed workers to get to the checkouts, Potts said.

“That measure had become quite stressful for our staff, and I heard that loud and clear,” the CEO said.

Having cut almost half of the company’s management board since his arrival, Potts announced Thursday that the commercial director of home-improvement chain B&Q will be joining Morrison in the same role. Darren Blackhurst spent the first 16 years of his career at Tesco before joining Wal-Mart Stores Inc.’s Asda and later becoming CEO of clothing retailer Matalan.

“It is clearly still very early days in Mr. Potts’ tenure, but we sense he is bringing a deep rooted and fundamental change to Morrison’s that is for the better,” Clive Black, an analyst at Shore Capital, said in a note.

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