Morrison Chairman Pick to Increase Pressure on CEO Philips

Wm Morrison Supermarkets Plc picked former Tesco Plc Chief Financial Officer Andrew Higginson to become chairman, increasing pressure on Chief Executive Officer Dalton Philips to return the grocer to profit growth.

Higginson will join the Morrison board as non-executive deputy chairman on Oct. 1 and later take over from Ian Gibson, who is retiring next year, the Bradford, England-based retailer said in a statement today. Higginson, 57, will step down as chairman of Poundland Group Plc, one of the discounters whose success is hurting mainline grocers in the U.K.

Morrison, the country’s fourth-largest grocer, has been hit hardest by the expansion of discounters including German chains Aldi and Lidl, which are luring customers with lower prices and no-frills offerings. Higginson’s most pressing task will be to assess whether Philips’ strategy of price cuts is enough to restore market-share growth and increase profit, said John Kershaw, a BNP Paribas SA analyst.

“The pressure is on Dalton Philips,” Kershaw said in a note to investors. “If there are no signs of sales traction, we suspect Mr. Higginson will act quickly to find a new CEO and potentially even look to shift strategy.”

Same-store sales probably won’t improve any time soon, Philips said April 30 after the grocer stepped up the battle against the discounters and said it would cut prices by 1 billion pounds ($1.7 billion) over three years, a strategy it said in March would reduce profit by about half this year.

Store Managers

Philips is counting on volume growth to eventually make up for a drop in the profit margin. Morrison said last month it plans to cut about 2,600 management jobs, pooling department manager and supervisor roles at stores into a smaller tier of team managers. The grocer is also opening more convenience stores.

Morrison shares fell 0.2 percent to 172 pence at 9:34 a.m. in London, reversing an earlier gain. The stock has plunged 34 percent this year, while Tesco is down about 19 percent and J Sainsbury Plc has dropped 12 percent.

The grocer has forecast full-year underlying pretax profit of 325 million pounds to 375 million pounds. Earnings in the previous fiscal year were 785 million pounds on that basis, the second straight decline.

“Andy Higginson has a tremendous reputation and a distinguished career at the forefront of retailing in the U.K. and I am sure he will be a huge asset to Morrisons,” Gibson said in the statement. Higginson was an executive director at Tesco for 15 years.

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