Morrisons set to post profits fall after CEO inherits ‘unholy mess’

Shore’s head of research Clive Black confirmed that he expected Bradford-based Morrisons’ profits to have fallen from £181m to £135m in the first half of the financial year, but he stressed that the new chief executive, David Potts, had inherited an “unholy mess” and a sharper business was emerging under his leadership.

Analysts are expecting poor results from the major supermarkets this autumn, as they continue to be squeezed by the emerging German discounters, Aldi and Lidl, who have grown rapidly since the recession.

Mr Black told The Yorkshire Post that he had issued a preview note about Morrisons’ interim results.

He added: “While we kept our full year profit expectations unchanged, we provided some colour as to the shape of the year with ‎our interim expectation of £135m reflecting our forecast for still falling same-store sales and still easing margins.

“It is worth remembering that David Potts inherited an unholy mess, that he only started in March, that it takes time to assemble a team - this isn’t a one man job - never mind make an ongoing discernible difference in-store, albeit We can see a sharper and more effective Morrisons starting to come through.”

A Morrisons spokesman declined to comment on the note.

Mr Potts took the helm in March, replacing Dalton Philips, who was ousted in January after sliding profits and sales.

Mr Potts has implemented a number of sweeping changes in a bid to transform the business, which have included axing the majority of the management team he inherited and cutting head office staff by 720 while adding 5,000 shop floor staff to improve customer service.

He has also brought back staffed express checkouts and got rid of the overly complex computerised queue management system.

Mr Potts has said customers “hold the keys to the kingdom” when it comes to deciding what direction the group should take.

He has visited more than 100 stores since he joined the business, and he has also promised to be guided by what customers and colleagues say the supermarket chain should be doing.

Mr Potts’ moves to take the store back to basics have won the approval of Sir Ken Morrison.

At the recent AGM, Sir Ken urged shareholders to be patient, as Morrisons’ new leadership works to turnaround the grocer.

Sir Ken endorsed the path to recovery laid out by Mr Potts and chairman Andrew Higginson.

The company’s lifetime president told the AGM: “I’ve personally met both of them and I’m assured by their stated intention to restore the company to its glory days.”

Morrisons was previously “a fast-growing, vigorous organisation, respected by staff, suppliers and customers alike”, he said.

“It’s a big job to restore the company’s fortunes, “ he said.

“Please be patient and allow the new management some breathing space.”

Morrisons was the best performer among the big four grocers, according to the latest Kantar Worldpanel data, although sales fell 0.1 per cent in the 12 weeks to July 19, after rising 0.1 per cent in the 12 weeks to May 24 .

Last month, Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said there is a very loyal core of Morrisons shoppers that admire the brand and what it stands for.