Morrisons launches price war in return to roots

The Bradford-based retailer, which is haemorrhaging shoppers to discounters Aldi and Lidl, said prices on popular branded and own label products will fall by an average of 17 per cent.

Analysts said the price cuts go way beyond what they had expected and will prompt a price war as Tesco, Asda and Sainsbury’s will have no choice but to respond.

Today’s announcement follows hot on the heels of scathing comments about the current management by former property director Roger Owen, who likened the retailer to a “supertanker heading towards an iceberg” and said chief executive Dalton Philips should have been sacked two years ago.

Mr Philips insisted he is the right man for the job as he unveiled a new TV advertising campaign with the slogan “I’m your new cheaper Morrisons” as the retailer attempts to return to its value credentials.

It has also announced plans to launch a new website, powered by mysupermarket.co.uk, that will enable customers to check prices over the past year.

Mr Philips said the 1,200 price cuts will really resonate with irregular Morrisons shoppers as the discounters only offer 1,300 products altogether.

“This is not a temporary skirmish. The days of loyally visiting your favourite supermarket to do all your weekly family shop are fast disappearing,” he said.

“I’m absolutely convinced that there is a structural change going on in this market. We’ve seen what happened to the airline sector – 50 per cent of it is now discount... It won’t turn back.”

Morrisons said it is willing to take a hit to the bottom line with plans to spend £300m of its three year £1bn budget on initiatives this year. Earlier this year the group reported a shock £176m loss in the year to February 2 following write-downs and an expensive exit from its online acquisition Kiddicare.

At the time analyst Graham Jones at Panmure described the outlook statement as “truly awful”, predicting a collapse in profits to £325m-£375m this year.

In an exclusive interview with The Yorkshire Post last weekend, Mr Owen called on chairman Sir Ian Gibson to resign, claiming he must take the ultimate blame for the decline in the group’s fortunes.

Earlier this month figures from Kantar Worldpanel showed that Morrisons suffered the most out of the big four supermarkets, losing 0.5 per cent of its share of the grocery market. The group’s shares have lost nearly a fifth of their value this year.

Analysts said the news that 35 to 40 per cent of the 1,200 items to be reduced will be brands is significant. Clive Black at Shore Capital said: “The fact that they’re cutting the price of brands is critical. If Morrisons is actually taking a knife to brand prices that is a real escalator. ”