Morrisons has reported a 47% fall in half year profits to £126m and is closing 11 supermarkets as part of its plans to turnaround the business.
Like-for-like sales in the six months to 2 August fell by 2.7%.
Yesterday (9 September), Morrisons confirmed the sale of its M local convenience chain to c-store veteran, Mike Greene.
Phil Dorrell, partner at consultants, Retail Remedy, welcomed the move.
“Now that the leaky bucket that was M local stores has been sold to a team led by retail entrepreneur Mike Greene, we should expect that Morrisons’ profit will look healthier in future,” he said.
“Morrisons approach was not considered not only in terms of location and rent but also in terms of proposition and format. Space was limited, ranges were more extensive that needed and overall the impression of the stores was poor.”
However, Dorrell said more work was needed to transform Morrisons’ core supermarket business.
“[David] Potts still has a long to-do list which just continues to get longer rather than shorter. With every trading update comes more pressure to turn the retailer’s fate and deliver some good news,” he said.
“We would like to see Morrisons invest in advertising, identifying its core audience and reconnecting by leveraging existing assets.
“Time is of the essence and a poor Q3 trading would put them in a very weak position so we will be watching for some quick decisions from Potts in the coming weeks. ”
Professor Heiner Evanschitzky, chair of marketing at Aston Business School, agreed Morrisons must refocus and reposition the business to improve profitability.
“Morrisons didn’t sense changing consumer habits quickly enough, and by the time they jumped on the convenience store bandwagon, they were left with locations that weren’t ideal – often in areas that were already saturated or were lacking in demand,” he said.
“Overall, the Morrisons brand of supermarkets aren’t well positioned in the market. They are neither top on value nor top on quality – they get squeezed by the likes of Aldi and Lidl from the discount end of the market and Waitrose and Marks & Spencer from the premium end.
“Make no mistake, the convenience store format may be the fastest growing, but larger stores are still more profitable. Morrisons will be looking to refocus and consolidate more widely to secure the profitability of the group as a whole – particularly on today’s news of falling profits in the first half of the year.”
Professor Evanschitzky also suggested Greene will have his work cut out to make the M local convenience stores a success.
“It’s a bold move from Greene to get into the business, he’s an expert on the convenience store market and his past retailing ventures have seen some success. But, he’ll definitely need some tricks up his sleeve to carve out a niche in the market for ‘My Local’.
“The question is: if Morrisons could not make the stores a success, what can Greene bring that will be different?”