Morrison Starts Search for New Chief as Holiday Sales SlumpJillian Ward
William Morrison Supermarkets Plc said Chief Executive Officer Dalton Philips will leave after five years in the job as it reported the steepest decline in holiday sales of all the U.K.’s biggest grocers.
A search for a new chief is already underway, the Bradford, England-based company said today, adding that Philips will stay on until March’s year-end results. Andrew Higginson will start as chairman next week, Morrison also said, bringing forward the appointment of the former Tesco Plc executive.
Philips, 46, is paying the price for a period of sustained sales declines that has seen Morrison’s share of the grocery market slide amid competition from discounters Aldi and Lidl and price cuts by rivals including Tesco and Wal-Mart Stores Inc.’s Asda. Morrison said today that it plans to close 10 unprofitable stores this year, following in the footsteps of Tesco, which also announced closures last week.
“Given the long run of decline and the lack of an effective recovery plan, it is inevitable that Dalton Philips had to go,” Neil Saunders, an analyst at London-based researcher Conlumino, said by e-mail. “Hopefully a new set of senior people will be able to turn things around.”
Morrison shares rose as much as 6.9 percent in London and were up 4.4 percent at 184.6 pence as of 9:02 a.m. The stock fell 29 percent in 2014, the steepest annual decline since 1993.
The decision to replace Philips was reached “over a period of time,” Higginson said on a conference call. “It’s a judgment call. In essence we think it’s time for a fresh look to regain some of that trading momentum.”
Under Philips, Morrison has experienced about two years of declining quarterly same-store sales. A 1 billion-pound price investment plan and a program to match prices of the discounters has yet to be reflected in improved sales momentum.
“The change in management shows this is much harder to fix than they thought, and clearly expected more positive numbers by now,” Bruno Monteyne, an analyst at Sanford C. Bernstein in London, said by e-mail today.
Higginson said on the call he’s “almost certain” that Philips’ successor will be appointed from outside the company, though has no-one in mind. Chief Financial Officer Trevor Strain is the “obvious internal candidate,” he said.
Under Philips, Morrison made a belated push into the growth areas of online and convenience retailing, where Morrison had traditionally trailed its main competitors. The CEO also instigated plans to eliminate 2,600 jobs in an effort to cut costs as the company’s loss of market share coincided with a shrinking and deflationary U.K. grocery market.
Philips “inherited a business that was ill equipped to deal with many of the challenges of a rapidly changing grocery world and it is fair to say that he has been playing a game of catch-up since he took the top spot,” Conlumino’s Saunders said. “Progress has been made in many areas, but it has often been piecemeal and at the expense of brand clarity.”
A new CEO needs to improve the grocer’s communication to customers on prices and remind shoppers of attributes such as food that it gets directly from farmers and processes in its own facilities, said Bryan Roberts, an analyst at Kantar Retail.
Morrison didn’t identify the 10 money-losing stores that it plans to close. The outlets represent about 83,000 square feet of selling space, CFO Strain said on a conference call. Tesco last week said it plans to close 43 stores.
Morrison’s sales at stores open at least a year fell 3.1 percent, excluding fuel, in the six weeks ended Jan. 4. That beat the median estimate of 11 analysts for a 4 percent drop and was an improvement on the previous three quarters.
The company repeated a forecast for underlying pretax profit of 335 million pounds to 365 million pounds in the financial year ending this month. Morrison made 785 million pounds on that basis in the previous year.