Give me two more years to turn this around, says Morrisons chief

Morrisons’ beleaguered chief executive, Dalton Philips, yesterday urged his incoming chairman to give him another two years to turn round the struggling supermarket.

His plea came as investors appeared willing to give him the benefit of the doubt as the shares closed up 6 per cent at 172.5p, despite like-for-like sales plummeting 6.3 per cent as customers continue to flee to discounters and rivals. Mr Philips said: “We laid out a strategy in March and it should take three years to turn around.”

He will need to persuade Andy Higginson, the former Tesco finance director, that price cuts, a new website and convenience stores can return the company to growth.

Mr Philips explained that the fall in sales in the 13 weeks to 2 November was mainly due to the supermarket’s Christmas range hitting stores four weeks later than last year.

“We wanted to keep October free to allow us to launch our Match & More card, so we pushed back Christmas promotions.”

The company unveiled a new loyalty scheme earlier this year, promising to price- match the discounters Aldi and Lidl – the first traditional “big four” retailer to do so.

The chief executive refused to reveal how many customers had signed up for the card, but said it had performed better than expected and welcomed newspaper adverts from the discounters attacking Morrisons. He said: “Both have clearly acknowledged that what we are doing is unique.”

However, he declined to give any indication on Christmas trading, beyond saying he was cautiously optimistic. Last year Mr Philips suggested that like-for-like sales could rise – and was subsequently forced to issue a shock profit warning shortly after Christmas when sales dropped sharply.

The company will now need to improve on the weak comparison or the pressure could once again ramp up over Mr Philips’ position.

Clive Black, a retail analyst at Shore Capital, said: “It is essential that the group trades much more robustly in the current quarter and then displays more evidence than it is currently showing that its trading strategy is striking a much stronger chord with British shoppers.”

In an attempt to restore some confidence among City analysts, Mr Philips narrowed Morrisons’ profit guidance, saying he expects full-year pre-tax profits to hit between £335m and £365m, from an expected £325m to £375m.

Web orders helped added 0.7 per cent to sales while the closure of its Netherlands packing factory helped reduce its £2.6bn debt pile.

But Mike Dennis, a retail analyst at Cantor Fitzgerald, warned: “The issue is that Morrisons’ main competitors are still using strong promotional mechanics, like £5 off a £40 spend, which is attracting away some of its shoppers.”