Morrisons could cut dividend as earnings slump
THE DAUNTING task facing the new boss of Morrisons was illustrated on yesterday when UK’s fourth biggest supermarket reported its lowest annual profit in eight years and warned investors it would cut its dividend.
The profit slump, a third straight decline, reflects Morrisons’ decision last year to spend £1bn on price cuts over three years to stem the loss of shoppers to discounters Aldi and Lidl, fuelling an industry price war.
David Potts, a former executive of Tesco, starts as Morrisons chief executive on Monday. He will try to improve the performance of its core stores through lower prices, and better product availability and customer service.
“While our broad strategy of saving to invest in our offer is the right one, David will be reviewing the plan to improve trading momentum,” chairman Andrew Higginson said.
“More customers means volume growth and it also means our stores are busier, our colleagues happier and we’ll get better deals from our suppliers,” Higginson added.
The chairman stressed that Morrisons was unique among British supermarkets in making over half of the fresh food it sells and has more freehold stores compared with rivals. It was also making progress in accelerating cost savings and reducing debt.
The firm, which trails Tesco, Asda and Sainsbury’s in annual sales, reported an underlying pre-tax profit of £345m in the year to February 1.
As well as price cuts the fall also reflects Morrisons late entry into the better performing parts of the market, namely convenience stores and online shopping. The company also wrote down the value of its property portfolio by £1.3bn to reflect the deterioration in market conditions.