Morrisons’ chief confident he has the backing of investors

Asked whether he will still be in place at the group’s annual results in March, Mr Philips said he is confident investors will continue to back his leadership as the company “has a great strategy” that is “endorsed by shareholders”.

“I feel confident in where we’re going. You can’t look at trading on a month by month basis. You have got to focus on the direction of travel,” he said.

His comments came after the Bradford-based supermarket chain reported a 2.5 per cent fall in like-for-like sales in the six weeks to December 30, down from a 2.1 per cent fall in the previous quarter.

Describing the results as “disappointing”, Mr Philips said Morrisons has three areas to focus on to increase sales. These include improving the effectiveness of promotions, overcoming the challenging consumer market and accelerating the move into convenience stores and online retailing.

The latter presents Morrisons with its biggest challenge. The group has entered the non-food online market with its purchase of Kiddicare and recently launched an online wine offer, but it lags rivals in online food retailing.

In 2011 the group bought a stake in New York online food retailer FreshDirect and it has sent staff over to the US to monitor how it operates, but it still has no launch date for a UK online service.

Mr Philips said the group will update the market at preliminary results in March.

He said that there are advantages to being a latecomer to online retailing.

“There are late mover advantages such as around technology. It’s very hard to re-platform the websites. We are garnering knowledge on what is working out there (in the US),” he said. “It’s about taking our business forward – multichannel and multiformat. We’ve started with wine and we’re very pleased with the innovation.”

The online food market is growing at 20 per cent and the convenience store market is growing at six per cent a year.

Morrisons has plans to operate around 70 convenience stores by this time next year. It currently has 12.

Asked where Morrisons has lost out, Mr Philips said floating customers with no fixed loyalty have gone online and to convenience stores.

“There are shoppers who are very promotional and shop around. Those are the ones we lost. Online is the fastest growing segment and it’s an area we’re not in. We need to be in these new channels,” he said.

Some analysts believe Morrisons is also alienating core customers who believe the revamped Fresh Format stores mean a move away from the group’s traditional value credentials.

Analyst Caroline Gulliver at Espirito Santo said: “Consumers have told us that their perceptions of Morrison’s promotions have fallen, but their perceptions of Morrisons’ low prices and good quality have also fallen, despite the reformats.

“These problems are in addition to Morrison’s current lack of an internet offer and convenience store portfolio.”

Asked whether the group is coming off its price message, Mr Philips said the new Fresh Format stores are seeing a four to six per cent increase in sales.

“Our value position is very strong. It’s not about disenfranchising customers – Morrisons’ Savers is growing at 40 per cent and we’re 60 per cent cheaper than at Aldi. It’s just not financially correct – a four to six per cent increase is a very strong number,” he said.

Mr Philips said he expects difficult market conditions to continue throughout 2013.

The group hopes to overcome this by promoting its points of difference – namely that it has 5,000 trained butchers, bakers and fishmongers in stores.

Last week the group announced a new advertising deal with TV presenters Ant and Dec and sponsorship of hit shows Britain’s Got Talent and Ant & Dec’s Saturday Night Takeaway in a bid to promote the chain’s fresh food credentials.

“We have real craft skills in our stores and we need to shout about it,” said Mr Philips.

Despite the sales decline, Morrisons said its full year performance will be broadly in line with expectations.

Analysts’ consensus for 2012-13 underlying pre-tax profit before yesterday’s update was £913m, down from £935m in 2011-12.

Asked whether the top management team is doing a good job, former chairman Sir Ken Morrison said: “There are a lot of good core staff at Morrisons.”

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