Morrisons to restructure business

Morrisons supermarkets have announced plans to restructure the business after a £176 million loss. Competition from other supermarkets, including Lidl and Aldi who have both seen increased profits and sales over recent months, have put pressure on the supermarket chain.

A competitive market

Chairman of the Yorkshire-based supermarket, Sir Ian Gibson said;

“In trading terms this has been a disappointing year for Morrisons, with consumer confidence and market conditions continuing to be challenging.”

Morrisons launched an online delivery service in January through Ocado, covering 20% of UK households. But most competitors already offer online delivery. As a result, some commentators have asked whether Morrisons was too late to the party?

Ninety Morrisons Local stores opened last year, smaller versions of the supermarket aiming to provide essentials similar to a traditional convenience store. Again, some have said this has come too late, with Tesco and Sainsbury’s already dominating with more ‘express’ stores around the country. But with one hundred more Morrisons Local stores planned to open this year they could soon be catching up.

Selling off stakes

As part of the restructure, Morrisons plan to sell off Kiddicare, their baby products business purchased in 2011. The company also plan to sell its stake in Fresh Direct, a New York food retailer. Additionally, they revealed plans to lower prices, introduce more targeted promotions and a loyalty card scheme to identify customer shopping habits.

Chief Executive, Dalton Phillips commented on the restructure;

“The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail.”

He went on to say;

“We’re taking the bold decision to ensure that we are giving our customers the very best price.”

Market-wide challenges

Morrisons announced plans to lower prices and target the market between discount supermarkets, such as Lidl and Aldi, and the ‘big four’ to offer great value, quality products to its customers.

The problems highlighted by Morrisons are challenges faced by all supermarkets big and small, with increased competition, changing shopping habits and customers increasingly shopping around for the best prices.

The entire supermarket sector fell in the FTSE 100; with Sainsbury’s falling 7.5%, Tesco 4% and Marks & Spencer 2%.

In summary

Morrisons is taking action to restructure its business after a substantial loss. The supermarket sector is hugely competitive, and Morrisons have tried to enter into the online delivery and local stores market, both of which are already occupied by the major supermarkets. In addition, Morrisons is selling off stakes in Kiddicare and Fresh Direct in favour of concentrating on customer-centric promotions and making sure they get good value at low prices. There are lessons other retailers can learn from Morrisons for the whole industry.

If your business has encountered financial difficulties and may need restructuring, our insolvency practitioners can help. Speak to us today for free, impartial advice with no obligation.