Morrisons chief feels the pressure as profits slide amid grocers’ price war

Dalton Philips sticks to guns on strategy to fight the discounters at their own game

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Morrisons’ chief executive, Dalton Philips, has defended his attempts to wrestle shoppers from the clutches of its rivals by slashing prices, even though the grocer’s first-half profits more than halved.

Mr Philips admitted yesterday that he was “under pressure” amid a price war triggered by the German discounters Aldi and Lidl and ratcheted up by the supermarket heavyweights Tesco and Asda.

First-half pre-tax profits slumped by 51 per cent to £181m, Morrisons announced – the lowest level since 2006 at the height of its disastrous integration of Safeway.

Sales at supermarkets open longer than a year plunged by 7.4 per cent over the six months and 7.6 per cent in the second quarter as the price war heated up.

Mr Philips’ role is under increasing scrutiny, not least from bookmakers who are taking bets on whether he will be fired.

“As a chief executive you always feel under pressure to execute a big plan,” he said. “You feel it acutely, but I’m confident in this plan.”

He hopes to turn round the grocer’s fortunes by spending £1bn over three years on slashing prices, investing in shops, opening convenience stores and delivering online grocery orders – via partner Ocado – to more homes.

Morrisons invested £135m in cutting prices in the first half to fight Aldi and Lidl at their own game. It also said customers would be charmed back to its shops through extras including fresh-food counters, cafés and fuel.

Clive Black, an analyst at the broker Shore Capital, said he was encouraged by positive recent market data for Morrisons, but warned that it was aided by investment in promotions and that the strategy of Dave Lewis, the new Tesco chief, will also have an impact. Mr Black said: “We would be very surprised if a stronger and simplified value proposition was not at the centre of any plan to rejuvenate [Tesco’s] core chain – a change in approach that must result in waves of discomfort for the rest of the sector.”

Shares in Morrisons, which have declined by more than 40 per cent over the past year, rose by 1.20p to 177.80p after the retailer said it remained committed to a 5 per cent dividend increase to 4.03p. In contrast, Tesco slashed its half-year dividend by 75 per cent two weeks ago.