13th Jan 2015 08:36
LONDON (Alliance News) - Wm Morrison Supermarkets PLC Tuesday said that Chief Executive Dalton Philips will step down in March after five years at the helm, as the struggling grocer continues to try and return to growth after once again underperforming its major rivals in the sector over the key Christmas trading period.
The supermarket chain revealed a 3.1% fall in like-for-like sales excluding fuel over the six weeks to January 4, a performance that was better than recent quarters. However, it still meant that Morrisons was the weakest of the UK's big-four grocers.
Morrisons said it has begun the search for a new CEO, with Philips set to leave once the company reports year-end results in mid-March. Morrisons said it is almost certain the next CEO will be an external candidate.
"Dalton has done a good job under difficult circumstances, but now it is time to restore growth in the business," Chairman Elect Andrew Higginson told journalists. "It was a judgement call based on trading momentum around the business. A business like this needs trading momentum to perform, and we think it is time to restore that... time for a fresh pair of eyes."
Morrisons added that current Chairman Ian Gibson will retire at the company's board meeting on January 22, with Higginson succeeding him.
Philips revealed a raft of measures last March that he hoped would turn around the business, after it lost further ground to bigger rivals in 2013 and was hit by growing heavy discounters like Aldi and Lidl. The measures included heavy investments in price cuts, property disposals, the sale of baby products retailer Kiddicare, and cuts to capital expenditure. At the time, Morrisons warned that all those measures would weigh heavily on its results in 2014, but would then result in a strong rebound from 2015.
"He deserves particular credit for facing into and dealing with the pricing issues that have now become evident, for taking the business into the convenience and online channels, and for the steps he has taken to modernise the company's operating systems," Higginson said.
Morrisons, the UK's fourth-biggest supermarket business by market share, said that its like-for-like sales performance improved compared with recent quarters, and it also grew market share in food on the back of better "pricing and execution".
The UK grocer said like-for-like sales excluding fuel were down 3.1%, and down 5.2% including fuel. By comparison, it said like-for-like sales, which are from stores open longer than a year, fell by 6.3% in the third quarter, following a 7.6% drop in the second quarter and 7.1% in the first.
However, the UK's biggest retailer, Tesco PLC, last week revealed that its UK like-for-like sales were down 0.3% in the six weeks to January 3, and down 2.9% excluding fuel for the 19-week period ending on the same date. J Sainsbury PLC, the third-biggest grocer by market share, said like-for-like sales were down 1.7% excluding fuel for the 14 weeks to January 3.
Morrisons said total sales for the six-week period were down 1.3% excluding fuel, and 3.6% including.
"Our like-for-like sales were a step-up on recent quarters and trends in the key operational measures continued to improve. Our three-year cost saving and cash flow targets remain on track. Although there is still much to do, we are building the platform to enable us to compete better in an industry that we expect to be highly competitive in the year ahead," said Philips.
Morrisons said it will have softer comparatives over the next three quarters.
Morrisons also announced plans Tuesday to close 10 loss-making supermarket stores during 2015, although did not give a timeline on when it expects these closures to take place. Higginson said 409 employees would be affected by the closures.
"They will be small supermarket stores with a combined store space of 80,000 square feet and combined total sales of less than GBP50 million," said Higginson.
Morrisons narrowed its profit guidance for the full year, stating that it now expects to deliver an underlying pretax profit for the financial year to beginning of February of between GBP335 million and GBP365 million. It said this figure is after GBP65 million of new business development costs and GBP70 million of one-off costs.
The grocer said it expects to make property disposal proceeds of between GBP400 million and GBP500 million in the financial year ending next month, with year-end debt in line with guidance at now more than GBP2.4 billion.
The results and changes were welcomed by investors, and Morrisons shares were up 4.9% at 185.60 pence early Tuesday, making it the best-performing stock in the FTSE 100.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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