1st May 2014 15:17
LONDON (Alliance News) - Wm Morrison Supermarkets PLC Thursday launched a new round of permanent price cuts with big splashes in UK newspapers and advertising elsewhere, part of its bid to turn around its declining market share and fend off the heavy discounters that have been luring away its customers.
Morrisons announced permanent price cuts on 1,200 products across its stores, as it starts to invest the GBP300 million it has said it will spend on various "customer propositions" this year.
Morrisons has been struggling to keep pace with bigger supermarkets like Tesco PLC and J Sainsbury PLC, and Asda in recent years, and has already had to invest heavily in trying to catch up in the fast-growing online and convenience store sectors. The fast growth of the heavy discounters like Aldi and Lidl during the recent economic downturn have only added to its woes.
Morrisons swung to a pretax loss in its most recent financial year, and then announced a raft of measures aimed at turning around the business. Those included heavy investments in price cuts, property disposals, sales of businesses including baby products retailer Kiddicare, and cuts to capital expenditure.
Morrisons said it has been taking specific categories and reducing its prices since March, having already brought down the price of fresh produce items, and said it has seen big increases in sales of those lines.
"We live in a changing market... online is growing, convenience is growing, and we have seen rise of the discounters, and at Morrisons we are adjusting," Chief Executive Dalton Philips said in the company's new five minute pricing campaign on its website.
Morrison's new price cuts include own-branded products like bacon, which is now 15% cheaper, beef mince, which is down 20%, as well as branded products likes Jamie Dodgers, McCain home chips, and Napolina chopped tomatoes, down to 79 pence, from GBP1.25.
"Morrison's price cutting snow-ball has gained a significant amount of momentum, after a measured start revolving largely around weekly fresh produce price cuts," retail analysts at Shore Capital said in a research note.
"Until this pricing environment settles and there is some visibility in forecasts, it is very difficult to be more positive on the UK supermarket segment from an investment perspective," Shore said.
The retailer has characterised its new pricing activity under the banner of "I'm your cheaper Morrison's". It placed a full front and back cover spread round the Metro freesheet distributed in city transport hubs Thursday morning.
"The price cuts are said to average 17%, supported by considerable marketing activity. Most noteworthy, to our minds at least, is that the cuts embrace proprietary brand manufacturers' lines; we believe that up to 40% of the price reductions are branded," Shore Capital said in its note.
Morrisons shares were down 1.7% at 197.53 pence per share Thursday afternoon.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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