Morrisons denies it is losing touch with the core shoppers

Following a barrage of criticism from analysts yesterday, chief executive Dalton Philips said: “I’d refute emphatically that we are too upmarket. We are a value retailer and we’re not moving off that. We’re not moving upmarket.”

The criticism followed a 2.1 per cent fall in Morrisons’ like-for-like sales in the third quarter covering the 13 weeks to October 28. This was a deterioration on the 0.9 per cent fall reported in the first half.

The Bradford-based supermarket chain is trailing rivals, prompting criticism that the retailer is losing customers to Yorkshire rival Asda and discounter Aldi.

Mr Philips admitted that the group needs to do more to get its value message across to customers and yesterday the group parted company with commercial director Richard Hodgson, who joined from Waitrose two years ago.

Corporate services director Martyn Jones, a Morrisons stalwart from the Sir Ken Morrison days, has been appointed interim commercial director while the group searches for a successor.

“I’ve asked Martyn to work on our 2013 plan,” said Mr Philips.

“Our Christmas campaign will be very value-orientated with a £20 deal to feed a family of eight a Christmas dinner with turkey and all the trimmings. We will be very focused on value.”

He said that research undertaken by the company has revealed some “alarming facts” about Christmas spending.

“A third of families are saying they will consciously cut back on presents,” he said.

“A fifth will cut out traditional Christmas treats such as tins of chocolates and biscuits or nuts and 25 per cent say they will travel less to see friends and family.”

The high price of fuel is deterring many people from making the usual festive visits.

Much of the criticism directed at Morrisons has involved the launch of its Fresh Format layout in 82 stores.

Critics have said core customers don’t want gimmicks such as vegetables swathed in dry ice or exotic produce such as tinkerbell peppers, yellow courgettes and samphire.

Mr Philips defended the move, saying that stores that have been revamped with the Fresh Format layout have seen a four to six per cent increase in sales.

But analysts remained critical.

Philip Dorgan, at Panmure Gordon, said: “We think that the relatively slow rollout of new format stores and online are red herrings. Morrisons is underperforming because it needs to do its day job better.”

Clive Black, at Shore Capital, said: “We are of the view that Morrisons has re-engineered its proposition in a way that, for whatever reason, is ‘disenfranchising’ its core customers; a totally unintended consequence we should add.

“That change implies a move too far away too soon from its value roots to our minds. Correspondingly, we are of the view that Aldi and Asda in particular have been direct beneficiaries of this development – fascias that retain strong value credentials.”

He added that he is very worried about the trading performance of “bog standard” Morrisons superstores.

Mr Philips said: “Our stores that don’t have Fresh Format are competing in a very challenging environment.

“We’ve got to tell people in those local communities Morrisons is doing something different. Why buy foreign meat when you can buy 100 per cent British?”

Another area the group is keen to publicise is that unlike its rivals, Morrisons has its own trained butchers, bakers, fishmongers and florists in store.

Mr Philips denied allegations that there is internal strife at the head office in Bradford.

In April marketing and operations director Richard Lancaster left and in June finance director Richard Pennycook said he will leave the business next June after eight years at the firm.

“I refute allegations that there is internal strife,” said Mr Philips. “We have a management board of 10 people. We’ve lost Norman Pickavance (human resources director) and Richard Hodgson. Richard Pennycook is staying here until June. Losing two people out of a board of 10 is not internal strife.”

Total third quarter sales, excluding fuel, fell 0.4 per cent.

This is partly explained by Morrisons’ lower level of store openings compared to rivals as well as its lack of an online food outlet and a significant convenience business.

Although sales were lower than anticipated, Morrisons said it anticipates a full-year performance “broadly in line” with expectations, helped by productivity improvements.

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