Morrisons' 720 axed jobs to cost £40 million, quarterly sales drop 3 per cent

New boss David Potts promised to carry out a major review

Sales dropped 2.9% in the 13 weeks to May 3 (Getty)

Morrisons’ plans to axe 720 jobs from its head office will cost it £40 million in redundancy pay and restructuring according to new boss David Potts.

Potts promised to carry out a major review of the entire organisation at the same time as Morrisons sales were revealed to have dropped in the three weeks to May.

Sales dropped 2.9% in the 13 weeks to May 3. Morrisons also added its voice in warning that price deflation is set to continue for at least the next 12 months, in line with an earlier prediction by Mike Coupe, chief executive of Sainsbury’s.

Chief finance officer Trevor Strain said: "We acknowledge food deflation will hit for a while."

Potts added that deflation had already hit the business, with prices dropping 4% in the last year and suggested that prices could fall even more as he returns Morrisons to its "traditional" position of lower prices.

Since arriving, Potts said he has visited 90 Morrisons stores, where he has been making sure more food in on the shelves and removing large posters and signage to give a brighter appearance.

He added that stores are being cleaned more often than under the old regime, where former boss Dalton Philips attempted to save cash by cutting back on window cleaners.

Potts said: “We are a food retailer and in order to be valued we need to be clean and tidy and having high standards of cleanliness is what’s important to our customers.”

The review will take place over the next few months and be presented at the half year results in September, with Potts saying everything would be on the table including the recently introduced loyalty card which is the first supermarket to match prices against Aldi and Lidl.

Online sales were performing well, according to the company, attributing 1% to the like for like sales.